greek debt gold prices

On the heels of a weak first quarter for 2015 comes a slow recovery for the economy. Let’s take a look at the major factors influencing the price of gold as the calendar moves into mid-June—and beyond.

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Fed Rate Increase Negative for Gold?

The Federal Reserve Bank discussed the possibility of raising interest rates during their two-day meeting that was held on June 16 and 17. Doing so could cause the dollar to explode, bringing negativity to gold prices since this commodity does not bear interest. Some analysts, though, point to the fact that if the Fed should move too quickly and raise interest rates rapidly, investors might feel uncertain about the dollar’s future and shaky about its potential to be a stable force. This could strengthen gold’s value. Janet Yellen, however, announced that the Fed would not raise interest rates at this time. She did, though, indicate that a rate increase is possible before the year ends. In fact, indications are that the Fed will not increase interest rates until September at the earliest. The take-home for gold on this issue is a continuance of the status quo for now.

Greek Tragedy Positive for Gold

Some analysts—such as those at Capital Economics—believe that Greece’s growing financial crisis will be a positive indicator for gold’s stability and position. Even as Greece and its creditors continue to talk without making much progress, plans for the country to begin lending—or even selling—its hoard of gold seem to be unfounded, as noted by Quora. As the Mediterranean country marches ever closer to a catastrophic default, Greece could be even more influential to gold than the dollar itself. This speculation is backed by evidence such as the continued strong showing of gold at greater than $1,200 per ounce in spite of the dollar’s recent rebound. As Capital Economics notes, though, a Greek default at this stage would hardly be a surprise and attention would likely focus on the country’s exit from the European Union instead. Either way, economic disaster in Greece spells gains for gold.

IMF Unsure About Propping Greece Up Indefinitely

Christine Lagarde, chief of the International Monetary Fund (IMF), has stated the organization’s reluctance to offer Greece any further accommodations. According to the BBC, if the country does not meet its obligation to repay 1.5 billion Euros to the IMF by June 30, it will be in default without the possibility of a grace period. This sum is a combination of Greece’s four payments that are due throughout the month. In addition to its IMF debt, Greece also needs to find an additional 2.2 billion Euros to meet its obligations for payment of social security, salaries for the private sector and pensions. The entire world, including gold investors, is watching Greece right now, as they sink or swim.