On Sunday, there was a snap general election in Greece, in which the left-wing Syriza party was re-elected. What does it imply for the gold market?

Sunday’s snap election was called after Syriza lost its majority in August. Tsipras’ party won just over 35 percent, slightly down from its previous result and still short of an overall majority, but close enough to renew its coalition with the nationalist Independent Greeks. However, the coalition looks now more vulnerable than it did the first time round, with only 155 seats in parliament compared to 162 last time, which means only a five-seat majority.

The results are a bit surprising, given Tsipras’ complete reversal on his pledge to end austerity and approval for the new bail-out agreement. Perhaps, other parties are even worse. Anyway, what is worrisome is the constant, if not growing, popularity of the radical left parties (even if they are hypocrites) in Europe.

Just two weeks ago, socialist Jeremy Corben won the Labour leadership in the UK. He proposes a huge increase in government spending, a new form of quantitative easing, higher taxes for the rich, and renationalization of railways and the energy sector. Yes, we are talking about the UK, the cradle of capitalism, not about Venezuela or even Greece.

Another potential danger for the EU is the parliamentary election in Catalonia on September 27. It is likely that the Catalan political parties favoring independence will increase their outright majority of seats, so we can expect more talk of a referendum for Catalonia to leave Spain (nationalist leaders have promised to declare independence within 18 months if they win the vote) and tensions between the separatist region and the central government in Madrid. As political uncertainty escalates ahead of an election, the gap between Spanish 10-year bond yields and Italian yields has widened to a two-year high.

To sum up, Syriza was re-elected on Sunday and is going to rule in a more vulnerable coalition than before. Therefore, the new government may not last for too long. Any radical changes could spur some safe-haven demand for gold, however, it seems that now more worrying developments are occurring in Spain (apart from China, the U.S., and the UK with a radical socialist as a new leader of the Labour Party) as the possible independence of Catalonia would shake the European Union.

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

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