Today’s hot news is the Greek elections. Syriza, a radical leftist and anti-austerity party, has won the Greek general elections. The elections had a muted effect on financial markets, since Syriza's victory was largely anticipated and discounted. In fact, gold prices dropped after the results were announced, because Syriza has moderated its position over the past few months. In other words, investors bought the rumor and sold the fact, taking profits after the results.
Also, Syriza fell two seats short of an absolute majority and had to form a coalition with the right-wing Independent Greeks, which may be unstable. Therefore, the results are not seen as the worst possible outcome and we do not expect major changes in the gold market in the nearest future (but it is worth remembering that markets tend to be quite emotional in the short term).
However, the results of the Greek elections may be bullish in the long term for the gold market. First, it puts Greece on a collision course with Europe. A Grexit is rather not probable, especially after the announcement of European quantitative easing, which would benefit the Greece, however some form of debt restructuring is on the horizon. The negotiations will increase market uncertainty and volatility, supporting the gold price. Second, the anti-austerity and socialist government will definitely not help the uncompetitive Greek economy. Conversely, the populist decision in Greece may only aggravate the Eurozone crisis.
Arkadiusz Sieron
Sunshine Profits‘ Market Overview Editor
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