The Daily Market Report: Gold Consolidates As Greek Deal Remains Elusive

25-Jun (USAGOLD) — Gold remains consolidative within the range, despite yet another failure by Greece and its creditors to strike a deal. Relatively calm markets suggest investors are clinging to optimism that something will happen before Tuesday’s deadline, when Greece is required to make a €1.6 bln payment to the IMF.

However, today was widely viewed as the last opportunity to reach an accord and still have time to get approval from the various governments. The IMF has already pledged that no additional grace period will be granted. While I suppose they could still back-off on that if a deal were reached, it doesn’t sound like any progress is being made in the negotiations at all.

It is a game of chicken, with both sides refusing to alter their courses as they hurdle toward each other. This could still go horribly wrong; with potentially disastrous ramifications for Greece, the whole of Europe and even the global financial system.

Nonetheless the market seems willing to hold its collective breath and hope for the best; that calmer heads prevail. Certainly there is a long history of last second deals to avert disaster, but one of these days, someone is going to make a miscalculation

If that doesn’t occur this time, it may well happen next time. And as we’ve discussed in recent commentary, a deal now would at best get Greece through August. After all, the technocrats of Europe need a deal so they can take their usual 4-week holiday in August.

Just think of all the time, energy and euros expended by policymakers across the Continent over the last five-years: Endlessly kicking the Greek can, just a little ways down the road. This too may be the new normal, if the EU is to continue.

That also leaves the system extremely vulnerable to a black-swan type event. As such risks rise, the need for gold as a safe-haven asset is going to rise as well.