Global stock indices opened in the green this morning as Greece finally conceded to creditors' demands over the weekend. The new deal amounts to a third enormous bailout for the Greek government, totaling €86 billion ($96 billion). Although markets are initially exuberant on the risk-off sentiment of Greece reaching a deal to remain in the eurozone, all may not remain calm on the seas of Europe: Greek PM Alexis Tsipras now faces political backlash in his home country after reversing a considerable number of campaign promises to reject more austerity measures from creditors, as a whole series of reforms to Greece's economy are tied to the bailout funds. Wall St pointed higher on Monday morning while the precious metals each opened about 1% lower, excepting palladium, which added 1.5%.
Yesterday in the Markets
As Greece made its first real progress in talks with its creditors, and China’s stock market rallied 4.5%, Friday saw renewed optimism from the markets that everything will sort itself out eventually. Shares of Apple did post a 5-day losing streak on concerns about its heavy investment in the Chinese market, though investors were otherwise bullish on stocks on Friday. European shares traded as much as 3% higher, with Athens’ main index better than 2% in the green, while U.S. equities advanced by more than 1%. Though spot gold was flat at $1,160/oz by week’s end, the other precious metals all gained modestly on a soft day for the dollar; the DXY tumbled by more than 1% to 95.5, helping boost the yen, pound sterling ($1.55), and euro ($1.1125) as a result.
Factors Affecting Gold Today
Expect the metals to continue to trade lower as the Greek debt situation looks to be on a path to resolution. The one potential factor that could drive safe haven flight would be the disruption from a political fallout in Greece as all the voters who were promised a different solution that another bailout from creditors possibly turn against their elected leaders. While it's true that the Greek people were sold a false hope of escaping austerity measures, the Syriza government did make a pretty determined effort to push the negotiations to their very limit to secure a better deal.
The dollar continues to gain as crude oil production hits new highs. Hell-bent on holding onto every ounce of its market share, OPEC has left production levels at high levels even with the recent drop in oil prices. Saudi crude output is currently at an all-time high of 10.6 million barrels per day, as Saudi Arabia and its regional allies pump as much crude as possible in order to suppress prices and force out shale producers in the U.S. Meantime, new hopes that a deal may yet be struck with Iran regarding its nuclear program—and therefore flood the market with Iran's presently unsellable oil inventories—are also helping push crude prices about 1.5% lower. The dollar's strength will also place downward pressure on the precious metals until the trend changes.
With a break in the drama with Greece and China's stock market seeming to bounce back on Friday and again Monday (+2.4%), U.S. Treasuries also saw a sell-off, dropping 10-year yields back to 2.45%. Spot gold sat about $11 lower at $1,153/oz around 10 am EST, while platinum slid to $1,030/oz, $120 per oz below the gold price. Silver was down 25¢ to $15.48/oz, yet palladium gained $8 to $662/oz.
June retail sales figures are released tomorrow, while Fed Chair Janet Yellen is expected to speak before Congress on Wednesday.