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Greek Worries Bolster Gold Price

Monday, June 20, 2011

Continued Euro zone uncertainties and a postponed decision to extend further emergency bail-out loans to Greece have today (20th July 2011) pushed the gold price within 2.5% of last month’s all-time high, achieving a spot price of £954.74 per Troy Ounce just after 8am.

Why do the Greek economic worries strengthen the gold price?

Gold prospers in times of uncertainty, hence the continued gold price progress during the past three years! The proposed €12 billion loan to Greece, scheduled for July, could be halted if Greece fails to make guarantees to its Eurozone partners that it will step-up its already burdening austerity measures and commit to maintain its solvency for the next 12 months, that is to avoid national bankruptcy and make headway with its national debt.  Even with the loan, the Greek economy would still be perilously weak.

The fear that a national economy, particular a Eurozone member state sharing a single currency with several of the world’s leading economic super-powers sends many high level investors looking for security and shelter from the fickle currencies markets.  As the Euro and US Dollar weaken, gold traditionally prevails. As the bulk investors channel demand, the price follows.

How will this impact the gold price long term?

There are no long term guarantees, only trends. With many commentators cautious of the world economic growth, troubles in Libya, Syria and Yemen and several other European countries in precarious economic shape, the gold price is thought to retain strength.