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If Gold < $1175, Then Cyprus Out Of Eurozone?
Be prepared for the next great transfer of wealth. Buy physical silver and storable food.
zerohedge.com / by Tyler Durden on 04/16/2013 12:16 -0400
One of the unexpected consequences of the recent plunge in the price of gold (for whatever reason, and there are many proposed explanations for why gold has tumbled, none of them completely accurate or comprehensive) is that when the European Commission set the precedent with the forced sale of Cypriot sale for a total of €400 million “to cover ELA losses” as Mario Draghi dictated to the aptly named head of the Cyprus Central Bank, Panicos, he set a line in the sand especially when it comes to German expectations. Because while the size of the Cypriot bailout will likely keep expanding, the one fixed component is the €10 billion loan that Merkel has still to get approval for in parliament. This number is set in stone, and any additional bailout “funding” will have to come from either further depositor impairment (until eventually even the insured depositors become impaired, again) or as the case may be, the country is forced to sell all of its sovereign hard assets, like its gold. Which means that no matter what, Cyprus will have to sell enough gold to cover a €400MM shortfall, as point 29 of the Debt Sustainability Analysis demanded.
And therein lies the rub.
While a week ago, when gold was $1600/ounce the self-funded component (read “gold sale”) of the Cypriot bailout amounted to just over 10 tons of gold, as of today’s price and EURUSD rate, Cyprus would now have to sell 12 tons of gold to cover the gap, if it were to hit the sell button today (assuming a price of $1385/ounce and a 1.315 EURUSD exchange rate). As far as we know, Cyprus hasn’t sold one ounce yet. But what if gold keeps tumbling as it has in the past three days? Well, the problem as most know, is that as of March based on IMF data, Cyprus only has 13.9 metric tons of “excess” (as the EC defined it) gold.
Thanks to BrotherJohnF
2013-04-16 13:45:04
Source: http://silveristhenew.com/2013/04/16/if-gold-1175-then-cyprus-out-of-eurozone-2/
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