Last night, as soon as the news hit the wire that the United States had dropped tomahawk missiles on Syria, gold rallied $12. Far East traders reacted to the news and here in the States, algorithm programs kicked in. It wasn’t until the President made his speech that gold took another $5 leg up. As things calmed down, some short-term trading profits were taken and now we sit and watch and wait to see if there are any repercussions to our actions.

Before the attack, I already had a comment I wanted to share with you today. With gold up $11 this morning solely on the attack last night and the dollar and Treasuries flat, we now await precious metals' reaction to the job numbers that just came out. In the meantime, I still think sharing these comments and news items makes a lot of sense.

Premiums are softening as dealers see more products coming in the door than out. Tight trading ranges and continued retail interest in equities seem to be the major factors affecting our markets. But the main culprit is the Federal Reserve members current policy of sharing their opinions between meetings. I know I am repeating myself, but when the main players are absent from our market, like the Wall Street Traders who create liquidity, the market just sits there. One just needs to look at the CME Futures trading volumes of late to understand what is going on.

I am sure if the Chairwoman comes out and states that there will be no more sharing of opinions by Fed members, our market will come to life again. Just look at the story this week on the resignation of Richmond Fed President Jeffery Lacker.

We all see the Dollar and 10-year treasuries trading in a tight range. Those two items are the catalysts for any movement in the price of gold. But the Fed is driving the car and unfortunately has our road cut off, and until a policy change is put in place I expect our car will be in park for a while.

But there is a lot going on around the globe and the U.S isn’t the only country that has a say in the price of the yellow metal. You just have to look over the pond to see where the potential firestorm will erupt.

One part of the world that can have a serious impact on the future price of gold, Greece.

Greece is back in the news again as negotiations in Brussels between Greek ministers and bailout monitors get close to an agreement on pension cuts and labor reform. Athens has no choice but to adapt these reforms as more bailout money is desperately needed.

Greek prime minister Alexis Tsipras has asked for an emergency summit of EU leaders this month if the finance ministers fail to reach an agreement on the next bailout for Greece today. An agreement today will pave the way for a release of over six billion Euros to avoid a Greek default on its credit obligations in July.

As the country tries to stay afloat, we still see major hurdles to overcome. Greece’s unemployment rate is an astonishing 23.5 percent and according to the Greece state employment agency new claims have risen since the beginning of the year. The unemployment rate in Greece stands way above its EU partners where the average unemployment rate is 8 percent. Things are getting worse in the country as over half of the unemployed have been without a job for over a year. One interesting figure to share with you is that over 300,000 skilled young workers have left the country in the last 6 years to look for work elsewhere.

For the employed, they have seen large increases in taxes which in turn has helped revenue collections this past year. That’s the only good news from the government perspective. Central bank officials are concerned with the amount of money that has been taken out of the banks in 2017. These funds were withdrawn by small to medium size companies worried about a failure to get bailout money which in turn could cause a banking crisis. Banks in Greece have a similar problem like their friends in Italy. Greek banks have almost a 50 percent non-performing loan portfolio on their books. I cannot imagine here in the states what would happen if we had a 23.5 percent unemployment rate and a bank loan default rate of close to 50 percent. There probably would be blood in the streets.

As I have written in the past, an exit from the EU by Greece, Italy, Portugal or Spain is highly unlikely. In my opinion, they will hang around to the very end looking for a handout from the EU. And if France departs from the EU (remember the election in France is days away) this will leave Germany holding the never-ending responsibility of keeping these countries afloat. When will it ever end?

As this saga continues an investment in physical Gold looks wise.

Have a wonderful Friday!

 

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