Gold is up slightly this morning erasing some of Friday’s losses. A weaker U.S. dollar index is also encouraging bargain hunting. Gold last reported a.m. is $1168.60 up $2.80 and silver is steady at $15.84.
Political strife between Greece and the European Union intensified as the new anti-austerity government said it may consider new elections if eurozone partners reject proposed reforms from Athens. Greek finance minister said the government would hold a plebiscite on fiscal policy if faced with a deadlock. Varoufakis is the second high ranking official suggesting a referendum may be held.
A letter outlining prospective reforms was sent to Euro group chairman Jeroen Dijsselbloem last Friday. Thus far the letter has been greeted with disdain even being called amateurish by one EU official. Time is running out once again for Greece as Prime Minister Tsipris knows the ideas he ran on were just that, ideas with no hope of becoming reality. Anti- austerity slogans works fine as long as you can back them up with reality but Greece’s economy remains in shambles. Two choices are available for Greece; borrow more money, if you can or face the music and default on national debt. There are simply no other options.
Germany is becoming increasingly irritated by actions or the lack there-of on part of the new government but they knew beforehand that Greece was an economic train wreck. Germany has the only stable economy in the EU placing the country in the awkward position of being the one who has the most to lose as hopes for a miracle deteriorate. The IMF estimates Greek debt as of last year at 12.2 billion and has worsened by a drop in tax revenues over the past several months. Varoufakis stated, ” we only have enough money to pay the salary and pensions of public employee’s, for the rest we will have to see.” There is no possible way this can end good for Greece and the EU. Eventually default will occur and when it does global markets will hemorrhage.
Shanghai Gold Exchange reports Chinese gold demand for the first two months of 2015 to be between 410 and 420 tons. So far this year China has consumed about 85 percent of global new mined supply which equates to two thirds of global gold production. Like silver, gold demand will create a supply deficit throughout the next several years. For the time being mines are producing both precious metals at a net loss.
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