Greeks Buy Physical Gold on Default Fears

Release Date: 
Friday, February 13, 2015

Gold and Silver Prices

Gold prices rose on Friday following disappointing economic news and a lower dollar but nonetheless ended the week in negative territory.

“Gold futures headed for the biggest gain in two weeks as weaker U.S. consumer confidence added to concerns that the economy is slowing and boosted demand for the metal as a haven… ‘The weaker dollar on the back of the poor data is giving gold a lift,’ Ross Norman, chief executive officer of bullion dealer Sharps Pixley Ltd., said …” (“Gold Futures Head for Biggest Gain in Two Weeks on U.S. Outlook,” Bloomberg, 2/12/15.)

Gold finished the week down $5.40, closing at $1,228.90, while silver prices closed the week at $17.42, up $0.63.

Greeks Buy Physical Gold on Default Fears

Fears over a possible default and departure from the Eurozone have sent Greek investors to physical gold.  

 “Greek demand for gold coins is rising as investors search for a safe haven from the country’s political turmoil, according to the U.K. Royal Mint...Greek investors are turning to gold with the nation heading toward a standoff with creditors over its international bailout program, fueling speculation that it may break its membership with the euro…”

“The one thing everyone knows about gold is it is a good thing to hold if your currency is about to devalue,” Matthew Turner, an analyst at Macquarie Bank Ltd., said via phone. “It would be understandable for Greeks to buy gold because they are afraid of losing their money… During periods of monetary uncertainty people will always think gold is a useful addition to their portfolios….’”

(“Greek Investors Buying More Gold Coins from UK Royal Mint,” Bloomberg Business, 2/9/15.)

Central Banks Buy Gold To Second Highest Level in 50 Years

The World Gold Council reported that central banks increased their gold reserves to near record levels in 2014.

“Central banks around the globe continued to gobble up gold to add to their reserves in 2014 purchasing a total of 477 tonnes, which is a 17% jump from 2013, according to the World Gold Council. It was the second highest year of central bank purchases in 50 years…”

“What is behind the strong appetite for gold among the world's central banks? Bhatia pointed to two main reasons. First, ‘central banks are buying gold because of heightened economic and financial uncertainty. The global economy remains on very fragile ground with growth in Europe, Japan and emerging markets stagnating’, [WGC director of central banks and public policy] Bhatia said. ‘Yields in major economies are declining. Around the world we are seeing monetary policy continue to ease amid a serious deflation threat.’”

“The second major driving factor behind central bank gold purchases are relative under-allocation to gold by emerging market central banks...”

“Looking ahead, Bhatia believes that ‘emerging markets will continue to be strong buyers, with Asian central banks standing out as being under allocated within that group.’…”  In 2015, the World Gold Council expects central banks to be net buyers for the sixth year in a row with more than 400 tones of purchases in gold.” (“Central Bank Gold Purchases Surge To Second Highest Level In 50 Years,” Kitco, 2/13/15.)

Greece Going Broke

“Greece warned it was on course to run out of money within weeks if it doesn’t gain access to additional funds… Greek Economy Minister George Stathakis said in an interview with The Wall Street Journal that a recent drop in tax revenue and other government income had pushed the country’s finances to the brink of collapse… The country needs €4 billion to €5 billion to tide it over until June, by which time it hopes to negotiate a broader deal with creditors….”

“Many Europeans already view Germany as the continent’s unyielding paymaster. Refusing to compromise with Greece’s new government over a few billion euros would further cement that image and open Berlin to accusations that it is ignoring Greece’s plight and riding roughshod over the democratic process.”

(“Greece Could Run Out of Cash in Weeks” by Matthew Karnitschnig, Nektaria Stamouli and Bertrand Benoit – Wall Street Journal – Feb. 6, 2015)

US Tax Fraud Expected to Exceed $20 Billion

The growth of identity fraud and an antiquated fraud detection system will likely result in more than $20 billion in fraudulent tax returns.

“Tax-refund fraud is expected to soar again this tax season, and hit a whopping $21 billion by 2016, from just $6.5 billion two years ago, according to the Internal Revenue Service. And the problem—which the agency admits is growing quickly—is compounded by an outdated fraud-detection system that has trouble identifying many attempts to trick it… One of the main reasons for the rapid growth is that it takes so little to file a false return—just your your name, date of birth and Social Security number. (Perhaps not coincidentally, this was among the information taken in last week's huge hack on health insurer Anthem….)”
(“Tax-refund fraud to hit $21 billion, and there’s little the IRS can do,” CNBC, 2/11/15.)

Goldline’s Express IRA® Program

Many Goldline clients choose to include precious metals as part of their retirement planning especially during times of economic crisis and uncertainty.* Goldline’s Express IRA® allows clients to acquire precious metals on their schedule; they no longer have to wait for your self-directed IRA to be funded before getting started.

Goldline's Express IRA® not only provides clients with the ability to diversify their IRA on an expedited basis, clients can also qualify for Goldline's ground-breaking Two-Way Price Guarantee Program℠ when they acquire $10,000 or more of our exclusive bullion coins. When an Express IRA® purchase qualifies for Goldline's Two-Way Price Guarantee Program℠ clients are protected on short-term upside and downside market movement: they can either call to reprice their coins if the selling price falls (up to a maximum of 28 days depending on the size of the purchase) or, if the selling price of the coins increase during the qualifying period, clients can call Goldline to acquire additional coins at the original selling price.

Goldline provides a wrap-up of the week's precious metals news along with important commentary on the American Advisor Week in Review audio program. Listen to the show below:


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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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