Gold Focus
Gold falls dramatically as Cyprus unveils plans to sell up its reserves in a bid to raise capital, the worth of the metal is said to be around 400 million Euros.
Cyprus is one of the euro zones smallest economies and this move is said to be a direct result from its European associates who say the island must go through with the sale along with the sale of other assets owned by the state, to help rise above its current debt crisis.
The ECB have noted that “Cyprus’s debt outlook is challenging, but will allow Cyprus’s public debt to remain on a sustainable path, provided that there is strong implementation of the adjustment program”
Cyprus’s economic outlook shows an economic tightening of 8.7% for 2013, 3.9% in 2014 but a 1.1% growth in 2015.
Despite all this, the islands central bank has commented the sale involves the board of directors of the bank only and that the sale is not being used to help finance the bailout plan.
What does this mean for the gold price?
If this selling off of gold reserves catches on to other countries such as Spain and Italy this could trigger a further bearish down turn towards the gold market.
On the other hand, there is a Central Bank Gold Agreement which was set out in 2009 stating members cannot sell off more than 400 tonnes per year over 5 year period somewhat putting a ceiling on mass selling.
Further, it’s important not to forget the mass purchasing from emerging economies, such as Turkey, Russia and South Korea, will help gold firm or at least put a limit of the price falling.
Therefore, although the price has contracted recently, supportive gold factors remain in the balance.
2013-04-11 09:13:25
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