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Weekly Summary: What Greece Might Mean to Gold and Euro Stocks

As of this writing, Greece has rejected the draconian measures that the ECB and IMF want implemented in Greece. Greece has called for a referendum on July 5 and the other 18 EU members have refused to extend the June 30 deadline for the IMF loan payment which is due on that date.

This means that Greece is set to default on a loan payment.

We need to emphasize that the IMF is looking after private banking interests, not the Greek nation or economy. The IMF (private bankers) are looking for social spending cuts AND the privatization of assets and services in exchange for more loans to make payments to the private bankers. It is worse than a Ponzi scheme, because in addition to the never-ending debt spiral, the IMF is foreclosing on Greek assets (privatizing them). Finance Minister Yanis Varoufakis is a smart man and cannot allow this to happen. If the ECB and IMF continue down this path, it becomes increasingly likely that Greece will pull a page from the 2008 Icelandic playbook and forgive all debt and start over again from square one.

When Iceland's President Olafor Grimmson was asked about Iceland's "let the banks fail" policy he said the following:

“Why are the banks considered to be the holy churches of the modern economy? Why are private banks not like airlines and telecommunication companies and allowed to go bankrupt if they have been run in an irresponsible way? The theory that you have to bail out banks is a theory that you allow bankers enjoy for their own profit, their success, and then let ordinary people bear their failure through taxes and austerity. People in enlightened democracies are not going to accept that in the long run.”

And when asked "what was the reason for Iceland's recovery" he said:

“We were wise enough not to follow the traditional prevailing orthodoxies of the Western financial world in the last 30 years. We introduced currency controls, we let the banks fail, we provided support for the poor, and we didn’t introduce austerity measures like you’re seeing in Europe.”

If Greece is forced( or decides) to follow the Icelandic plan, the Greek economy will have a hard time in the short term, but with control over its own currency it can be competitive and slowly grow its economy once again. What happens to the EU under this scenario, however, is anyone's guess.

This is why ANG Traders have bought insurance on our S&P European 350 index ETF (IEV) by way of put options. Even though our Model is still slightly bullish, the uncertainty keeps growing by the hour. Purchasing put options, allows us to limit any potential losses while leaving potential profits open-ended.

Gold, in the short term, could react in either direction. Our Model is neutral on gold at this time, but over the medium term it is signalling weakness as the first rate hike continues to get closer. If gold reacts to the upside, we will be looking at shorting above the trading range level of $1220.

We wish all our subscribers a profitable week ahead.
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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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