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Market Alert: Gold to Move with Greek Crisis
By: Julian Phillips & Peter Spina, for the Gold & Silver Forecaster -

-- Posted Wednesday, 13 July 2011 | | Source:

This week, the Greek Parliament voted for additional austerity measures in the face of its voter’s opposition. Will the country be able to implement these? For a country of 10 million people to carry a debt burden of $300 billion is unsustainable. Everyone knows this. With Ireland, Portugal, Spain and perhaps Italy lined up to follow Greece whichever way the Greek tragedy plays out, the consequences to the world’s financial markets are gargantuan.  


With the U.S.A. about to enter its very own Greek tragedy of an unsustainable debt load, rising through 2021, we are watching global debt threaten to bring down the entire global financial system. The U.S. Treasury Secretary, the Chairman of the Federal Reserve, the I.M.F. and the World Bank (among many others) has warned of this. Ratings Agencies have issued a warning yesterday that they will downgrade the U.S. to selective default if it misses a debt payment on August 4. August 4th is the deadline, but the downgrades could come ahead of that, from mid-July.  


Until the world’s cash flow –through a convincing recovery—rises to the point where developed world debt in its entirety can be serviced, the debt threat will hang over financial markets. The message has not sunk into investor’s psyche…yet…


In the near term, the situation that has prompted our alert has been the consequences of the Greek actions.  There are several scenarios that will affect your precious metal investments and their performance.


-       At best, we will see some pressure taken off Greece, but little confidence in Greece’s ability to implement the austerity measures. This will not cause any investors to move out of safe-haven assets.


v  If Greece fails to endorse and implement the austerity measures, gold in the euro will move strongly upwards. The euro will fall heavily alongside this move. The domino effect of the ensuing European-wide financial crisis will see gold bought heavily across the globe as markets wait for a second, worse ‘credit crunch’. The dollar will benefit from this failure too, but only in the shorter term.


v  If Greece does implement the austerity measures, the euro will rise against the dollar and gold with it, as funds return to the euro.


v  The dollar will then fall heavily as it enters its own debt crisis, pivoted on the battle of raising the debt ‘ceilings’ by August 2nd at the very latest. Note that the debt crisis in the U.S.A. extends well beyond the debt-ceiling issue! The debt-ceiling issue will trigger the crisis if allowed to.


v  Gold will rise once the ratings agencies downgrade the U.S. debt round about the middle of July.   Should Congress fail to raise the debt ceiling from $14.3 trillion by 2nd August, the gold price in the dollar will run up strongly as confidence in the dollar wanes. The world will then experience a credit crunch that will engulf global financial markets.


Gold and silver will then not simply be a profit opportunity, but one of the few places where wealth, as it was valued yesterday, will not only hold, but grow its value, tomorrow. 


Conservatively put, current gold prices should be seen as a buying opportunity!   


We will give you our forecast prices on a weekly basis as the situations evolve in the potentially volatile times ahead. Never has there been a more important time to consider the fundamentals alongside the Technical picture as the precious metals move from developed to global markets. You need to keep your finger on the pulse, not simply to have a price target!  




Our newsletter focuses on the issues that affect the gold price, expressing views on our favorites gold shares, the gold and silver markets, the dollar and other world currencies as well as oil. We have a select portfolio, for your reference.



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Kind regards,

Julian Phillips and Peter Spina

-- Posted Wednesday, 13 July 2011 | Digg This Article | Source:

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