Posted on July 14, 2015
The gold market essentially began the new trading week today where it left off on Friday. Going into the weekend this past Friday, there was significant concern of a further move away from the euro by Greece over the weekend. Markets have seen some volatility, however, as sheer panic has largely been absent as the Greece debacle played out.
The gold market may be deciding what to make of today’s news in which Greece secured an additional bailout to the tune of $95 billion dollars.
While global financial markets may be breathing a sigh of relief — for now anyway — skepticism over the deal will likely be seen once the “news” effect has worn off.
In addition, Greek Prime Minister Alexis Tsipras may come under fire from members of his own party in the coming days. Some may see the prime minister’s last minute agreement to sweeping austerity measures as a complete capitulation to German demands. In fact, some are likely already wondering if Tsipras will be able to hold his government together.
After running just several months ago on the Syriza party anti-austerity platform, Tsipras has now been forced to agree to legislation calling for higher value added taxes, pension cuts, and other spending constraints.
While Greece may have dodged a bullet for now, one has to wonder whether this is simply another act of kicking the can down the road. Austerity measures have already taken a toll on the Greek economy, and unfortunately, further austerity measures will likely force further economic hardship — in the short run anyway.
While Greece has been at the forefront of global headlines in recent weeks, China has also become a source of concern. After seeing its stock market drop by a third in a short period of time, China has put in place some aggressive measures to try to prevent a market crash. These measures include bans on stock selling by large position holders, as well as gaining commitments from brokerages to buy billions worth of stock.
Chinese markets have quieted down for now, although it remains too early to tell if the recent period of high volatility has run its course. While U.S. stocks and other risk assets may see buying interest based on the prevention of a Greek exit, additional volatility in Chinese markets could potentially cause the selling to spread in large fashion.
Gold may see a bit of a floor under it for the time being as investors remain somewhat skeptical, however, the technical picture for the yellow metal remains bearish.