By Hamza Khan, senior commodity strategist at ING

The Greek government’s decision to hold a referendum on the latest creditor package shocked the bond and equity markets. Should there be similar fundamental or financial shocks for commodity prices?

From a fundamental perspective, no. Greece as an economy contributes 0.4% of global GDP and its largest impact on the commodity markets – shipping – is unlikely to see disruptions as a result of the referendum.

The financial, or theoretical, perspective is different. We believe the fear of contagion and impact on currency markets will be felt most acutely in gold, crude oil and the base metals.

For gold, the rush to a safe, tangible commodity has an obvious appeal. During the global financial crisis in 2009, global gold ETF holdings increased by 623 tonnes, nearly double the 321 tonnes added in 2008 and nearly two and half times the previous five year average of 260 tonnes. In 2010, when the Euro crisis emerged, central banks increased gold investments from 77 tonnes in 2010 to 457 tonnes in 2011 and sent prices close to $2,000/Ounce.

European gold ETF holdings also doubled from about 500 tonnes in 2010 to about 1,000 tonnes in 2012 before falling back to about 600 tonnes in 2014. The caveat for gold is that USD strength and expectations for a US rate hike have pulled investors towards interest or coupon bearing assets. If the Grexit crisis becomes global, gold could rally above $1,200 per ounce. If the crisis is confined to Europe and the US equities recover, the higher dollar could lead to a test of the $1,150 floor seen recently.

The currency impact is also key for crude oil, as a rally in USD engenders proportionate adjustment in USD denominated crude oil prices. Since June 2014, an 18% appreciation in USD has pushed crude oil prices down by 46% (or 2.5x as much) and we expect crude oil weakness in similar proportion if the Euro softens further. Although other fundamental factors are supportive to the oil prices (including improved demand, low shale oil supply); the dollar looks king in the short term.

For the base metals (aluminium and copper), downward revisions in European growth would translate into lower demand for Chinese and Japanese goods which will in turn have a negative impact on industrial metals demand. Europe takes nearly 16% of China’s merchandise exports and remains a major end user for Cu and Al. As the recent sell-off in Asian equities has demonstrated, industrial demand appears to be at a precipice and a collapse in Eurozone confidence could push base metals significantly lower.

All told, we cannot predict the ultimate outcome of the Greek referendum, but believe it will be a key driver for prices of gold, oil and the base metals.