Greeks overwhelmingly rejected the latest bailout package from European creditors in Sunday's referendum. What does it mean for the Greek debt-crisis and the gold market?

Official results show that 61.31 percent of Greeks voted ‘no’ to a bailout package that would imposed more austerity measures. It is uncertain what does it really mean, since Greeks rejected an outdated, expired proposal from the country’s creditors. The surprising resignation of Yanis Varoufakis, the Greek finance minister, just deepens confusion. Some analysts say that the referendum results widen the gap between Greece and other Eurozone countries, while others believe that they could give Alexis Tsipras, the Greek Prime Minister, more bargaining power in talks with European creditors and soften creditors’ stance (we are not convinced, given the empty vaults of Greek banks).

What is certain is that the referendum results definitely do not imply the Grexit, however it may be the final outcome. Investors seem now to be expecting Greece to default (completely), since the yield on the Greek two-year bond rose by almost 15 percentage points to an astonishingly high yield of 48 percent. As a remainder, the Hellas has already defaulted on the IMF. And on Friday, the European Financial Stability Facility (EFSF) has said Greece is in "default" after it failed to repay the IMF earlier this week, but it has not demanded accelerated debt repayment.

The Eurozone will hold an emergency summit on Tuesday to discuss the Greek referendum, so a new deal is possible, however everything depends really on the ECB’s actions (today was scheduled a meeting to decide on ELA policy). If central bankers suspend funding for Greek banks running out of cash (oh, by the way banks will remain shut today), it would be a step closer to Grexit.

To sum up, Greeks said ‘no’ to a bailout deal in Sunday’s referendum and no one really knows what will come next. The results did not turn out to be a Lehman moment, but investors should remember that in reality it took over a week then until the market really started to sell off. Although Greek vote fails to boost gold prices (mainly due to strong U.S. dollar), investors seem now to be expecting Greece to default (there was a surge in interest rates on PIGS’ bonds). As there is a rise in volatility, investors fly to quality. So far mainly to treasuries, but gold may be next.

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Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor

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