The reaction of gold traders to an inconclusive result in the Greek elections would be a good indication whether the precious metal is able to retain its status as a safe haven asset.
The unofficial outcome is likely to see the conservative New Democracy party led by Antonis Samaras lead a pro-bailout coalition that buys the country more time to deal with its debt crisis, but not much more.
The Guardian quotes Alberto Gallo, head of European macro credit research at Royal Bank of Scotland, as saying the risk of a Greek exit from the Eurozone "has moved towards next year".
The far left Syriza part which vowed to tear up the agreements with the EU came a pretty close second and Daragh Maher, currency strategist at HSBC in London, told Reuters that "markets will be concerned about how narrow the margin of victory".
An exit by Greece from the Eurozone prompted by a Syriza win would have had far-reaching consequences for gold with one scenario predicting that "to stem any dollar shortages as a result of market panic, [apart from the ECB] other central banks including the U.S. Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank probably would stand ready with swap lines augmented after the bankruptcy of Lehman Brothers Holdings Inc. in 2008."
If the world’s central banks join hands to flood the market with cheap money it will be a massive boon for gold. Gold should recapture its allure as a storer of wealth and an inflation hedge. And it would hurt the dollar, boosting the metal's price.
As it turned out, Sunday's election outcome may not fundamentally alter the outlook for bullion which has enjoyed six straight trading sessions of gains although volumes have been light.
Twenty-four analysts surveyed by Bloomberg on Friday said they see gold gaining this week against only three seeing losses for the yellow metal.
The number one reason behind the confidence was the fact that gold speculators increased net-long positions by 27% in the week ended June 5, the latest data available, and holdings by exchange traded funds rose by just over 21 tonnes or $1 billion since the start of June. That marked a reversal after a three-month retreat.
Gold futures ended 2.3% higher last week with August contracts rising $8.50 to settle at $1,628.10 an ounce on the Comex division of the New York Mercantile Exchange after briefly touching $1,635 earlier in the day.