Investors should be aware that gold and silver prices are going to react to the effect of the
European elections on monetary policy. Over the weekend, Greek and French elections
demonstrated a serious popular sentiment against austerity measures. That sentiment was reflected immediately in currency markets. The Euro plummeted against the dollar. The dollar is currently strong, which is driving down gold and silver prices.
While it is certainly not the end of the world in terms of political processes, the elections
in Greek and France over this past weekend really demonstrate how unpopular the
austerity measures are in Greece and France. From an American perspective, many
investors really have to question the solubility of the European Monetary Union over the
In the past, when there were serious fiscal concerns in Europe, it benefitted the prices
of gold and silver greatly. Panic buying, risk hedging, and safe-haven asset buying have
been at multi decade highs in the past two years. We can assume that the same dynamic
will occur in the coming months.
A good sign of that inherent instability in the European Monetary Union is the immediate
drop in the Euro versus the Dollar when currency markets opened late Sunday. The Euro
dropped 45 pips against the Dollar immediately when markets opened, making the Dollar
As such, though gold and silver may be enjoying a surge in safe-haven asset buying
in the coming weeks, the current prices are relatively low based on the Euro/Dollar
valuation. If the elections in Europe are a display of European popular sentiment, and by
all indications they are just that, we will be seeing more of it in the coming months.
Behind all the news of the gold and silver markets there is the influence of global finance,
which is vastly influenced by politics. The events of this past weekend could prove to be
more important to the gold and silver market than many other determining factors.
Currently, we are seeing a dynamic of the strength of the dollar versus the Euro driving
down the prices of gold and silver.