Analyst: Gold's reaction to Grexit difficult to predict; Euro will either rally or plunge
Commodity consultant for INTL FCStone advises investors to watch the Greek bailout talks from the sidelines as he remains neutral on the gold market.
Meanwhile, Commerzbank's commodity strategists consider that the Greek crisis will hardly boost gold as a safe asset.
“We think it is frankly difficult to know how the gold market will react
to a likely Greek default. On the currency side, the reaction could
range for the euro to either rally strongly on the news (bullish for
gold) or sell off sharply (bearish for gold),” says Edward Meir, commodity consultant for INTL FCStone.
Meir also thinks the news could be bullish for the euro as the contagion of a Greek default would be limited as “most of Greece’s debts are held by quasi-government organizations.”
Commerzbank opines that the Greek debt crisis can hardly lend support to gold.
Gold prices are still trading around $1,180 /oz as Greece’s debt crisis escalated. “Talks with the Eurogroup are scheduled for Thursday, though any breakthrough appears questionable after yesterday. This brings the possibility of national bankruptcy at the end of the month ever closer for the highly-indebted country,” commodity strategists at Commerzbank say.
