The prospect of a Syriza victory in the Greek elections next week has been gold price supportive, but beware – it’s not a foregone conclusion.
Some of the recent positive action in the gold price has been due to fear of a Syriza win in the Greek election next week and a possible new government’s potential for cutting imposed austerity measures, defaulting on its financial commitments and, ultimately, for the country being forced out of the Eurozone. It would be the first Eurozone domino to fall and there are worries that if Greece goes, others may follow.
The attractions of the monetary flexibility of utilising one’s own currency rather than being forced to work with a currency, the Euro, the value of which is largely controlled by nations with much bigger, and more stable, economies, is strong regardless of the actual costs incurred in making the change – which would be enormous.
For a country like Greece with its enormous tourist industry, a weaker currency – probably far weaker if it should exit the Euro – could give this very significant sector an enormous boost, albeit hugely increasing the cost of imports at the same time.
Investors seem to be assuming that Alexis Tsipras’ Syriza party will win the election, but it is only perhaps 3-5% ahead of Antonis Samaras’ New Democracy party – the party of the ruling government, although the latter has only been able to rule in coalition with the much smaller Pasok party.
That suggests that the election result is perhaps too close to call and even if the pollsters findings are borne out, Syriza would still probably have to find its own coalition partner to gain a majority in the Greek parliament, and the attitude of the coalition partner to Syriza’s proposed anti-austerity programme could be key.
Syriza leader Tsipras has also been rather more circumspect in his proposals through the campaign.
For the rest of this article, click here: http://www.mineweb.com/gold-bulls-beware-greeks-bearing-gifts/