Metals Bouyant On 'Grexit' Fear

As precious metals continued to rally, worries about global growth and a Greek exit from the euro zone -- the so called “Grexit” -- were again pressuring stock markets around the world. Yesterday the DOW Jones Industrial Average posted its biggest loss this month, shedding 115.30 points and closing at 13,057.46. The selling continued in Asia with the Nikkei losing 1.17%.

Greek Prime Minister Antonis Samaras, who is visiting European leaders this week to fight for Greece to remain in the euro zone, is meeting with German chancellor Angela Merkel in Berlin today. His main objective will be to negotiate a longer time frame to implement his reforms. He hopes that Greece will reach the EU budget-deficit goal of 2% by 2016 -- two years later than originally agreed.

Bankrupt By October
Prior to the meeting, Samaras announced that his country would be bankrupt by October if the Troika did not release the scheduled €31 billion in new bailout money. In the same interview, Samaras also told the press that he would “personally guarantee” that creditors will receive their money. How this is supposed to work remains to be seen, but Merkel continued to be unimpressed, warning that Greece must maintain its path of reform to receive more bailout funds.

In the meantime, reports emerged, that a working group of the German finance ministry is studying the costs of a “Grexit” based on a “negative scenario”. The ministry, which previously refused to comment on the issue, stated that Germany continues to fight for a preservation of the existing euro zone, but that it was necessary to prepare for all scenarios, even improbable ones.

Bouyant Metals Outlook
Metals couldn’t care less, yesterday, and continued their strong weekly performance, while significantly decoupling from the stock market. Comex gold moved up another $32.30 (2%) to settle at $1,672.80 for the highest closing price in four months. The silver contract for December delivery rose by 90 cents (3%) and settled at $30.542. So far, these are weekly upside moves of more than 3% and 8% respectively, which should be very encouraging for gold and silver bulls and could attract further interest in the metals next week.