Greek Bank Run Fears Growing

With the economic situation in Greece becoming more fraught by the day, The Wall Street Journal reports that Greek depositors withdrew 700 million euros from the country’s banks on Monday, with fears growing of a widespread bank run. The chart below (courtesy of The Big Picture blog) shows the huge draw down in domestic deposits over the last two years:

Precious metals are still being pummelled by hedge funds’ “risk off” trades. Gold has now broken down below $1,550, while silver is trading below $28 and looking likely to test support just above $26.

The euro has sunk to $1.27, while the US 10-Year Note is yielding just 1.77%. The yield on German 10-year “Bunds” is even lower – at just 1.47% – while the Global Dow index of major stocks lost 0.99%, with Asian and “emerging market” indices particularly poor performers.

The mirror image of the euro’s decline is the continuing rally in the US dollar. The Dollar Index (USDX) gained 0.76% yesterday to settle at 81.22, its highest close since mid-January. Ever since late 2010 this index has continually run up against selling resistance around 82.00, so it will be interesting to see whether or not the euro fears are strong enough this time for the dollar bulls to push it above this level. Of course, any significant dollar rally substantially increases the likelihood of more aggressive money printing from the Federal Reserve, so this rally carries in it the seeds of its own destruction.

James Turk sums up the state of play in gold nicely in his latest King World News piece:

“Right now, the gold market is in the middle of a battle between the paper traders and the holders of physical metal. We are seeing huge Chinese import stats for physical gold and robust demand elsewhere for physical metal. So gold will eventually win this battle, just like it has for more than a decade. The reason gold will prevail is there are oceans of paper money swirling around, but so little physical gold.”