Gold prices are relatively flat thus far in early Friday trade as stocks and crude oil move lower while the dollar is slightly higher.
The gold market appears to be taking a breather following big gains seen in yesterday’s trade. The yellow metal has once again bounced from support levels, and has climbed back above the psychologically important $1200 level.
Gold and silver got a lift this week following Wednesday’s FOMC meeting announcement and subsequent press conference. Many considered the Fed’s commentary to be on the dovish side of the ledger, and the central bank seems to be reluctant to hike interest rates.
The central bank’s comments fueled buying in both precious metals and stocks. The dollar index turned lower, and further dollar weakness may potentially drive additional buying in gold and other precious metals.
Greece remains at the forefront of investors’ minds. Depositors have withdrawn $2.3 billion from Greek banks in just the last few days in a clear sign that worries about the country’s financial future are intensifying. The ECB is providing further credit to these banks in order to help them deal with the situation, however, that aid may come to an abrupt end soon if no deal is likely to be reached.
European leaders are set to meet again next week to further discuss the situation in what some believe may be the last opportunity for a deal to be struck. Bank withdrawals are likely to continue. In fact, a run on Greek banks next week is not out of the question. Should a run on the banks occur, it could potentially mark the beginning of the end for Greece as an EU member unless a last minute deal is reached.
Many analysts seem to feel that a Greek default is a foregone conclusion at this point. The country is supposed to make a 1.6 billion euro payment to the IMF on June 30th — and many believe that Greece will not be able to do so. Failure to make this payment could also be the beginning of a Greek exit from the shared currency. Tensions appear to be running high at this point, with both sides seemingly blaming each other for the lack of progress being seen.
Next week could be interesting if a deal cannot be reached. Risk assets may come under some pressure as the Greek situation comes to a head, while perceived safe-havens such as gold and silver may potentially benefit.
