Moody's Investors Service downgraded Greece's debt from A3 to Ba1, officially classifying the worst-hit member of the euro-zone as a "junk" bond risk.
The Dow immediately plunged almost a hundred points after the news, undermining its strong performance early in the morning. However, the downgrade was far from unexpected - despite austerity measures and a massive if belated bailout by the EU, Greece's financial situation remains dire and it threatens to bring other countries, like Spain and Italy, down with it.
The downgrade will make it harder then ever for Greece to maintain the unsustainable cycle of borrowing to pay the debts coming due, possibly accelerating some kind of general default and contagion throughout euro-zone and global markets.
The euro crisis pushed gold to record levels last week, and further debt scares might light another fire under the price this week. Dealer gold and silver, along with other precious metals like platinum and palladium, represent an attractive and stable alternative to the debt-ridden paper currencies like the euro and the dollar. Irrational exuberance in the stock markets may depress the price of gold for a little while, but one way or another, Greece's debts will have to be paid. The ensuing chaos in the markets could well push dealer gold to fresh highs.
