Feb 23, 2012

Another phase in the Greek tragedy - it could lose all its gold!

From Mineweb, Wednesday , 22 Feb 2012
Author: Julian Phillips

With the Greek bailout a done deal, gold and the Euro have gained a little, but nervousness over Greece's prospects prevails and the consequences of failure for Greece are dire.

BENONI -

New York took the gold price up to $1,759 up $29 from yesterday's London close. This was a bit much for Asia and London who pulled it back to $1,753 at London's opening. The euro was relatively unchanged on yesterday's level of €1: $1.3228 at the opening in London. In London, gold Fixed today at $1,754.75 and in the euro at €1,325.040. The euro was unchanged ahead of New York's opening. Gold went slightly weaker ahead of New York's opening with an unchanged euro after the Fixing. Ahead of New York gold stood at $1,753.90 and in the euro to €1.325.55.

Silver opened in London at $34.02 up 34 cents on yesterday. Ahead of New York's opening it stood at $33.08.

Provided the private lenders to Greece can be forced, against their will, to accept voluntary loss on their Greek Bonds [while they have insurance that pays 100% of their investment back instead of less than 50%], then the Greek deal is a done deal.

But down there in the small print of the Greek deal lies the nasty side for Greece. There lies a heavy penalty clause; Greece's lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal. Greece has 111 tonnes of gold. In other words Greece has given up on its "money in extremis", gold. If they default they will have nowhere else to go. Its international assets will be seized and it will not be able to trade internationally at all.

Today we are watching both Iran and the Sudan use their gold to buy food for their country as they have nowhere else and nothing else to get it with. Under the terms of this new deal Greece has effectively forfeited that last resort. And if they wanted to pull a last card from the pack by insisting on a Greek jurisdiction for any final arbitration, they have forfeited that too, by agreeing that future bonds issued will be governed by English law and in Luxembourg courts, conditions more favorable to creditors.

The option of leaving the Eurozone and surviving independently has now gone. If they do default [and many think the shrinking economy will force them down that road] they will have to accept whatever terms they can scrape together from the E.U. in order to survive! Greece is now a colony of the E.U. not a member!

A look back over the last couple of years arguing the Greek story, investors have to be concerned. The E.C.B. was not asked to take a haircut [two classes of creditors]. Creditors are being cornered into not triggering their Credit Default Insurance. Would you invest in the weaker E.U. member bonds

Global Gold Price (1 ounce)
	Today	1 day ago
Franc	Sf1,599.64	Sf1,586.97
US	$1,753.90	$1,738.00
EU	1,325.55	€1,314.13
India	Rs.86,405.88	Rs.85,735.54