Greece And Now Puerto Rico Mean Haircuts Aplenty | The Gold Forecast

Greece And Now Puerto Rico Mean Haircuts Aplenty

June 29, 2015 - 3:56pm

 by Gary Wagner

Gary S. Wagner - Executive Producer

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Gold Forecast: Proper Action

This morning we issued a buy reccomendation.

Maintain long gold @ 1178.50

Maintain stop @ 1161

Gold Market Forecast

Gold traded roughly $11 higher in trading overseas yesterday, and at the time of this writing has given back roughly half of those gains closing just off the lows of the day roughly at 1178 -1179. With an utter meltdown in the global equities markets, the Dow Jones industrial average closing off 350 points, the recent gains we have seen in gold could have been much higher.

However, the current crisis in Greece is far from over and it seems more and more unlikely that we will see a constructive resolution unfold. It seems highly likely if not inevitable that the $1.7 billion interest payment due to the IMF will not be paid.

There is also a higher probability that Greece will leave the European Monetary Union than there was on Friday. How this current crisis unfolds is anybody’s guess, and anybody who believes he or she has a real handle on how this will all play out must be psychic.

Trending Markets: Proper Action

Last week (Tuesday) we sent out a special trade alert recommending initiating short positions in the euro. The euro was trading approximately at 111.75 at the time of the sell.

Maintain current short euro @111.65.

Maintain current protective stop above today’s high of 113.47.

Trending Markets Forecast

To say that we had extreme volatility and dynamic range in the euro today would be a drastic understatement. In fact, we have not seen this much volatility in the euro currency since 2008. Obviously the debt crisis in Greece has come no closer to a resolution that on Friday. The interest payment due to the IMF tomorrow of 1.7 billion is still in play, although extremely unlikely to be met.

The most dramatic aspect of today’s trading was the extreme and quick recovery of the euro. Opening in Europe dramatically lower, and in fact trading to a low of 109.38, traders quickly drove the value higher, so it is now trading positive on the day.

What does this dramatic recovery say?  One possibility is the current belief that the European Union will do just fine without Greece; in fact, it might do better without Greece. Considering that the Greek economy accounts for roughly 2% of the euro zone’s GDP, not much would be lost should they exit the European Union.

We are left with another game of kick the can down the road, as if Sunday’s referendum and vote in Greece has any real intrinsic meaning at all.

Sentiment Indicator: