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Greece, Gold, and the G20

Autore: FX Empire Analyst - Barry Norman




Optimism after pro-bailout parties in Greece won a slim parliamentary majority, easing fears that Greece may exit the Euro-zone supported gains in riskier assets including metals. Investors were cheered by news that Greece’s New Democracy and PASOK - parties that support a bailout could save the country from bankruptcy after the final results announcement later during the session. The shared currency ‘Euro’ jumped to monthly highs trading up by 0.45 percent against the USD, and may support gains in metals pack in today’s session. The pro-bailout party may opt for modified conditions for accepting the bailout and may renegotiate the conditions set forth by the Troika and may have downside risk.

Further, Global economic recovery and growth will be the most pressing topic at the upcoming Group of 20 summit in the Mexican city of Los Cabos. Around the World, the chronic Euro-zone debt crisis, a dismal US economic outlook, and the slowdown of economic growth in emerging markets have prompted G20 leaders to take concrete measures at this time of unprecedented economic hardship. The G-20 may also discuss to increase the firewall to $430 billion in-order to limit severe downside risk arising due to default and may continue to support  gains in metals pack. Increased expectation of easing and support to boost economic activity may increase demand for base metals. Euro-zone and may limit much upside in today’s session

Gold futures prices perked up after touching as low as $1607 in early trading amid the final battle between the Greek anti and pro bailout party election. The citizens supported the pro-austerity government, erasing immediate worries of Greece abandoning Euro.

Asian equities therefore rallied with the euro getting a firm foot as the result would mean a coalition between the new democracy and Pasok is in the cards. Gold therefore is also likely to get a boost from after successful concession with Troika in coming days.

Today, market may welcome the marginal win of pro-bailout party with more insight into the G-20 meet where the leaders are expected to boost the euro firewall while Merkel is asking for something more. This would be another supportive factor for the euro which may take gold alongside. However, gain in the market could be short-lived as the pro-bailout party did not have a commanding win.

With unemployment over 22%, pressurized measure squeezed from the international lenders may not be fulfilled. So, the early morning recovery may be due to this G-20 expectation. Yet, as soon as the G-20 ends, anticipation regarding Fed meet may again face the market participants. With absence of any major economic releases around the world, the market is expected to be  calm.

Silver futures prices have also revived a tad from an early fall following gold. The market is likely to eye the G-20 meet today where the IMF is likely to boost the European fund firewall. With the Greek “pro-bailout” party wins the ballot, market sentiment would certainly be remaining positive today as the Greece exiting euro reduced. However, the austerity demanded from the international lenders may not be full-filled but in the near term, disaster has been averted and the EU is bound to make the concessions demanded by the new ( still to be formed ) Greek government.


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