On 5th July the people of Greece stood strong in its Oxi (no) vote, while this broke its unification to the EU thus tossing the Nai (yes) voters into unexplored and uncharted waters, the feeling of jubilation from its people in Athens conveyed a renewed hope. No longer would the tether of Europe strangle its people ” Now we can live free and without fear ”.Hold that thought there while we consider several important facts.
The EU no longer has the co-operation of the Greek people.
The debt has not evaporated overnight nor will it go away.
Europe will now grasp at whatever is necessary to recover debt
Greece will face unimaginable financial pain before the end of its dark Euro tenure ship
Clearly the financial world entered the summer of 2015 thrust into the washing machine of a European clean as the out of control debt & austerity measures imposed onto the Greek people brewed beyond breaking point. Many eyes in London were focusing on the EU / Greece next steps yet the Chinese implosion cascades further into the abyss seemed completely overlooked. This leaves stock market analysts scrambling to make sense of just how dire a situation the world finds itself. India’s booming demands dried up quickly leaving the Great Chinese vacuum to swallow up the excess (which it hasn’t) now Greece leads the race into bankruptcy with Spain,Italy,Ireland and even Germany feeling the Euro tourniquet contorting around there necks.
The natural response here would be for Gold to rally hard as the European currency collapses however a somewhat muted response coupled to a strong dollar has thrown the cat amongst the pigeons. Physical gold has historically always been seen as a safe haven when currency or equities weaken however the limp response may suggest the international community identifies that this is not simply an island dwelling 11 million population to consider but the handle of the European currency cup breaking away into a potential back draft from an incalculable financial black hole .
What comes next is anyones guess, with many trying to find some logic. We at Valuethemarkets suggest a defensive yet pragmatic outlook should be adopted until clear footprints have been laid. Volatility is almost a staple part of the summer diet so why not look to manage expectations while insulating against further loss.