The International Monetary Fund today warned that the Eurozone could see capital flight of $2.8 trillion unless the region’s leaders “act swiftly to restore confidence.” In turn, Italy saw its 12-month borrowing costs jump this morning from 1.69% to 1.94% at an auction of €8 billion in new short-term debt.
“The industrialized world is stuck in a severe debt and growth crisis,” says Andrew Bosomworth, head of portfolio management in Germany for US bond-fund giant Pimco, quoted by German news magazine Spiegel. “Central banks are fighting the disease with monetary infusions of previously unknown proportions, and the side effect is a slow but dangerous devaluation of money.”
Writing in the Irish Times, “The monetary environment has rarely looked more favourable for gold,” says economic analyst and consultant Charlie Fell. “The structural headwinds to robust economic growth, not to mention central bank rhetoric, virtually assure negative real short-term policy rates for many years to come. As a result, it is highly unlikely that the bull market in gold is set to end in the immediate future.”
Following largely peaceful protests in Athens on Tuesday against German chancellor Merkel, Greek unions today called an anti-austerity general strike for Thursday, October 18th.
But it’s not all doom and gloom for Greece. According to Bloomberg, “Fast Track” approvals of four gold mining projects in Greece will see it become Europe’s largest producer by 2016. Eldorado Gold (Stock Profile – TSX:ELD & NYSE:EGO) and Glory Resources are pushing projects forward.
“There’s clearly evidence that Greece has woken up to the potential of their mining industry,” said Jeremy Wrathall, chairman of Perth-based Glory Resources. “Politicians increasingly realize that a pro-mining stance is appropriate due to job creation potential.”
Environmentalism and local opposition remains the biggest obstacle to gold mining in Greece. Eldorado is betting more than $3 billion that objectors to expanding gold exploration in Greece will be swayed. The company intends to invest about $1 billion in the next five years.
Greece will account for about 21 percent of Eldorado’s 2016 gold production of about 1.7 million ounces, according to BMO Capital Markets research.
“I think people realize we are part of the solution, that part of the economic recovery will be due to mining,” said Eldorado’s VP & General Manager, Greece, Eduardo Moura. “I’m convinced that people who oppose our projects will come to realize that mining can be a positive force for change.”
Raymond James analyst Brad Humphrey recently rated Eldorado’s stock Outperform after visiting the company’s projects in Greece. He writes, “We continue to recommend investors accumulate Eldorado shares and are maintaining our Outperform rating and $18.50 target price. Overall, we were impressed with what we saw in Greece, as there are some clear opportunities within the country for Eldorado and, of course, some challenges.”
Eldorado’s shares are currently trading at $13.84 down $0.13 at publication time.