Precious metals, once again, spent a majority of the week trending downward. The stories really haven’t changed and the market is still very much concerned with what is happening in Greece. The entire situation over there has not had a major impact on markets, but that is mostly because investors are awaiting an official outcome before making any drastic decisions. As it stands, however, the situation in Greece is deteriorating by the day as banks continue to run out of money and citizens grow ever more frustrated.
Another economic situation worth talking about has butted its head in China and is already taking the world by storm. It has been no secret that China has had its economic and financial problems over the course of the past year or two, but this week things got far worse than anyone would had projected.
Greece Says No to Austerity
Towards the end of the week last week, we were busy focusing on Greece and their upcoming referendum vote. The vote, held last Sunday, allowed Greeks to decide whether they would trade austerity measures for more EU-backed funds, or if they would say no to austerity and forge their own path; one that would likely see them kicked out of the European Union. Finally, by the time markets opened on Monday, the world found out that about 60% of those that voted voted against austerity measures. Though the vote was celebrated as a victory, the real problems have only just begun.
Now, a few days on, Greek banks are running out of money and so too are ATMs. Greek government officials are still trying to strike any sort of deal that will see money sent their way, but there hasn’t been much progress to speak of. Going forward, we will continue to keep an eye on Greece, but with each passing day it seems as though they are inching closer and closer to an exit from the European Union.
Chinese Stocks Suffering
Chinese equity markets have been under a lot of stress recently, and it all came to a head on Wednesday when China’s Shanghai Index partook in a nosedive of sorts. With Chinese stocks moving downward across the board, other stock markets began to take notice. In places like Australia, South Korea, and the United States, stocks also moved downward on the news of China’s troubles.
While this may sound like good news for gold and silver, the fact that China, the world’s leading consumer of precious metals, is doing poorly only hurt spot values. Even on Wednesday, initially large gains were later outdone. The Chinese government is doing all it can to prevent stocks from falling even further, but so far little progress has been reported. It must be said, however, that even though China is performing poorly at present, stocks there are still at decent levels thanks to an extended bullish run that took place towards the end of 2014.
Looking ahead to next week, I am of the opinion that our focus will remain on both China and Greece. As Greece struggles to find funding, and China looks to rectify its deteriorating economy, investors are left to wait and watch. For now, gold and silver are in a bit of a limbo, not being able to move too far in either direction, but that very well might change by the time markets open back up next week. The FOMC meeting for July is also beginning to concern investors, but is presently being overshadowed by the two aforementioned scenarios.