Greeks, Europeans, Even Americans Rush to Gold on Greek Crisis
Greece missed its International Monetary Fund (IMF) payment earlier this week – the first advanced economy in the world to do so. All of Europe is watching to see if Greece stays in the eurozone and what the ramifications could be for the relatively young euro currency. And while they wait, they’re buying gold.
European mints and gold sellers have reported a huge leap in gold sales since this weekend, when Greece announced bank closures. The Wall Street Journal reports that the British Royal Mint is experiencing twice the demand for gold sovereigns from Greek customers.
Meanwhile, the last time the European retailer CoinInvest.com saw sales like this was during the Cypriot banking crisis in 2013. Bloomberg spoke with the company:
Most of our common gold coins are sold out,’ Daniel Marburger, a director of Frankfurt-based CoinInvest.com, said by phone. ‘When people learned that the Greek banks will be closed, they started to think that it may not be such a bad idea to have some money in gold.’”
It’s not just Greeks buying this gold. Europeans in general are turning to the yellow metal as an alternative to the euro. Even United States demand for gold spiked in June. US Wholesaler Dillon Gage reported a 70% increase in volumes in June from May. The Wall Street Journal shared some insights from Dillon Gage President Terry Hanlong:
Retail investors who buy coins and bullion have been influenced, Mr. Hanlon said, by the images of bank lines in Athens far more than by concerns about monetary policy in the U.S. over the past few years.
‘It’s a lot easier to relate to the idea that you could be standing in line and then hear your bank say it is closed and, sorry, you’re not going to get your money,’ Mr. Hanlon said.”
No kidding. At least a few Americans seem to be getting the message that you want to be prepared in advance for a banking crisis.
It’s not hard to imagine that some retired Greek pensioners are wishing they had this foresight. About one third of Greece’s banks opened yesterday to issue pension payments. Retirees thronged to these banks to receive meager handouts. Bloomberg reports from the National Bank of Greece in central Athens:
[The waiting pensioners] were to receive a maximum of 120 euros ($133), compared with the average monthly payment of about 600 euros. Many left with nothing after the manager said only those with last names starting with the letters A through K would get paid.”
How would you fare if your pension payments were suddenly slashed 80 percent?
Remember – a lot of Greeks were caught completely unawares by this crisis, despite the fact that it has been brewing for years. Greece is an advanced, modern economy. It’s not giant, but as of 2013 the Greek economy ranked among the top 50 in the world. Among the 28 members of the European Union, Greece ranked as the 13th largest economy.
For many Greek citizens, the idea of major bank closures and being completely cut off from their savings accounts was probably unthinkable.
Should Greece end up abandoning the euro, its citizens could be in for an even bigger surprise. According to Bloomberg, the latest survey shows that a majority of Greeks would vote “no” on the referendum this Sunday. That means they would reject the further austerity measures required to continue receiving international aid.
If Greece does vote down further aid on Sunday and the long-anticipated Grexit moves forward, all the euro savings of Greek citizens could be converted to a new currency overnight. And it’s virtually guaranteed that currency wouldn’t carry anywhere near the purchasing power of the euro.
When that day arrives, there are going to be a lot of Greeks who wished they had purchased gold and silver when they had the chance.
Americans should take note. While the US economy currently dwarfs that of Greece, the US government’s debt obligations are growing and on increasingly shaky footing. As Peter Schiff has emphasized again and again, the only thing keeping the US afloat with its creditors is the ability to print money through the Federal Reserve.
The Greek crisis and associated gold demand is a stark reminder of why it is important to have some of your savings in precious metals well in advance of a financial crisis. Not only is gold demand surging in Greece, but there’s a good chance local premiums for the yellow metal are also especially high right now – if you can even find any to buy. Gold and silver are long-term investments that are meant to protect your savings in case of emergencies like this. They are your financial insurance policy. We urge careful investors to prepare for the future and put just 5-10 percent of their savings into precious metals.
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