Gold spiked to a three-month high, and silver popped up close to a four-month high, as the Financial Times reports that the IMF last week considered implementing "The Cyprus Plan" on Greece, once it runs out of money. The socialist government in Athens still believes that they can threaten to take the entire EU down with them in order to get concessions from their creditors, but the EU, ECB, and IMF say they are prepared to contain any financial contagion if the beleaguered Mediterranean nation goes down the tubes.
Greek jitters this morning have European stocks and the euro currency lower. The dollar is moderately higher, while Wall St. opened mixed in volatile trading.
Yesterday in the Markets
Consumer sentiment in the U.S. was reported at a seven-month low on Friday, sending stocks and the dollar lower. Analysts had expected the report to remain steady at 95.9, but it dropped to 88.6. The drop in the dollar allowed gold to get back into positive territory after a bit of consolidation of large gains, to end the day and week up. Spot gold closed marginally in the green, up $2.10, but gold was up 3% for the week for the best week of gains in four months. This extends the rally in gold to two weeks.
The Dow and S&P 500 closed Friday barely in the positive after a last-minute rally, but the NASDAQ was down slightly. The S&P was up less than 2 points, but it still counted as a new record. Crude oil saw marginal gains.
Factors Affecting Gold Today
The housing market index from the National Association of Homebuilders slowed slightly in May, but is showing that foot traffic in the new homes business is sparse. With fewer people shopping, this should indicate lower new home sales. The report sent stocks lower in New York.
Recent volatility and lower volumes in the stock market may be an indication that the big players are moving out. Bloomberg this morning reports that "equities in the U.S. are valued about 10 percent above the cost of replacing their underlying assets -- higher than any time other than the Internet bubble and the 1929 peak."
Gold is gaining despite a morning rally in the dollar, as investors leave the euro due to growing concerns of a collapse in Greece. The Greek government has still not provided actual details on how it will meet bailout terms agreed to by the previous administration. It was supposed to present a plan to creditors in March, then in April. After dipping into an emergency fund at the IMF to meet a loan payment TO the IMF, and seizing cash reserves from state-owned businesses and municipalities, the end is in sight for the leftist Syriza government.
ISIS terrorists in Iraq have seized control of the town of Ramadi, which was the scene of many bloody confrontations during the U.S. occupation. The Shiite-dominated government in Baghdad has called up Shiite militias as it prepares for a counter offensive, and the government of Iran has pledged further support against the invasion of the Sunni extremists who have conquered sections of Syria and Iraq and proclaimed their own nation.
If that doesn't shake up the Middle East enough for you, Saudi Arabia is going to buy an atom bomb from Pakistan. Fearful that negotiations between the major nuclear powers and Iran do not go far enough to prevent Iran from building a nuclear weapon, Saudi Arabia and its allies among the Persian Gulf monarchies have been discussing building nuclear power plants to enrich uranium, and start weapons development of their own.
Saudi Arabia has a "fast track" to becoming a nuclear power, as it has been the major provider of economic aid to Pakistan. Looks like the investment of all those petrodollars in Islamabad are going to result in a package or two arriving in Riyadh soon.
Tomorrow is all about inflation numbers (or the lack thereof.) The UK releases consumer prices and wholesale prices reports, and the EU releases composite consumer prices and merchandise trade.
Germany sees the results of the latest ZEW economic sentiment survey, while the U.S. will be looking at housing starts.