Even though they were rough days for gold prices, I was really enjoying a vacation from talking about Greece. Unfortunately, that break is over as the euro gained back ground against the dollar as Greece implements a new debt swap plan that will voluntarily restructure their bonds, a fancy way of saying the investors can either “volunteer” to take a haircut or Athens will do it anyway.
Gold was up $13.22 to $1,698.25 yesterday morning, silver up $0.57 to $33.93 and the silver to gold ratio is 49.9.
The news has European stock markets all aflutter and commodity prices were up sharply as the euro gains back ground against the dollar.
Roughly 60 percent of Greek bondholders have indicated they’ll take the deal, enough for Greece to avoid total default in favor of selective default instead, which is a little like bragging about being the thinnest kid in fat camp.
Either way this deal is likely to serve as a model for other European nations struggling with debt. Investors are likely to get similar volunteer opportunities in Ireland, Portugal and Spain, although of the three Spain seems like the most likely to be able to avoid large-scale restructuring.
Back in the U.S. claims for first time unemployment were higher, but still better than analyst expectations and the numbers support a continuing recovery in the job market. That should be good news for equities markets today.
For gold and silver this is all mixed news. I expect gold prices to drift back up to the low $1,700 range, about where we were before the hedge fund managers arrived. From there price moves will, more or less, be linked to changes in currency values.
That’s provided we don’t get a signal from the Federal Reserve that they found a new excuse for more easing, which I think they will eventually. The Fed will have to print money to keep U.S. exports competitive on the world market or risk losing those jobs. Chairman Bernanke has done an admirable job resisting that inevitability so far, even allowing his hedge fund buddies to get scalped in the gold market over the last week. Unfortunately the need to ease is inevitable and a cash dump will happen eventually.
In the meantime, $1,700 looks pretty attractive. If you have a small monthly buy scheduled, I don’t see any reason to hold off.
(An important interview) Saving the Net from the surveillance state (And Crony Media): Glenn Greenwald speaks up (Q&A) | Nick Sorrentino