With gold dropping Monday due to news in Greece of the far-left Syriza party winning Sunday’s general election, which resulted in the euro falling to 11-year lows in the wake of Mario Draghi’s fateful decision to implement quantitative easing, the fate of Europe has become ever more uncertain. With a lot unfolding in Europe, the spot gold price at $1,282/20/1,283.00 fell south to $11.20 on Friday’s close, trading within an intraday range of $19. By Tuesday it had climbed $13, spelling out the high volatility of the time.
With Syriza’s 149 seats , and an anti-austerity coalition with the right-wing Greek Independents party’s 13 seats, Syriza leader Alexis Tsipras is looking to renegotiate Greece’s 240 billion euro bailout, hopefully leading to a default on its debt. The euro dropped to 1.1098 on the news before increasing and settling at 1.1251.
“There will no doubt be more moves in the embattled currency. This in turn should move gold around to a degree… the longer-term picture is unclear at the moment, so look for day trade opportunities as and when they present themselves,” Marex Spectron’s David Govett said.
“Gold has lost upside momentum on a stronger dollar due to increased contagion risk in the eurozone following Syriza’s victory,” FastMarkets analyst Tom Moore said.
“We would expect the Fed to exercise caution over its rate decision this week, providing gold with renewed upside pressure. A move toward raising rates would otherwise boost dollar strength, further reducing the US’ global competitiveness,” he added.
Germany Made Nervous?
As written by BCC, Europe’s core, specifically Germany, is not happy that Greek could default on its creditors. German government spokesperson Steffan Seibert said Greece must “take measures so that the economic recovery continues.”
Germany has warned the new Greek government that it must live up to its commitments to its creditors.
“There is very little support for a write-off in Europe,” said Jeroen Dijsselbloem, president of the Eurogroup.
“A part of that is Greece holding to its prior commitments and that the new government be tied in to the reform’s achievements,” government spokesman Steffan Seibert added.
Syriza leader Alexis Tsipras has said he aims for negotiation with international lenders, as opposed to conflict.
“The new Greek government will be ready to co-operate and negotiate for the first time with our peers a just, mutually beneficial and viable solution,” Mr Tsipras said following his election win.
But Mr Tsipras said: “The troika for Greece is the thing of the past.”