Cyprus To Sell 400 Million In Gold To Finance Part Of Its Bailout

thatguy · Apr 10, 2013

http://www.zerohedge.com/news/2013-...ll-€400-million-gold-finance-part-its-bailout

Curious why every bank and their grandmother, and most recently Goldman today, has been lining up to push the price of gold as low as possible? Here's why:

CYPRUS TO SELL 400 MLN EUROS WORTH OF GOLD RESERVES TO FINANCE PART OF ITS BAILOUT - TROIKA DOCUMENTS - RTRS
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But, but... the bailout was prefunded and there was no need to provide any additional cash? What happened: was the deposit outflow discovered to have been even greater than the worst case scenario and thus Cyprus needed even more cash? As for the buyers? We will venture a guess: central banks buying at the lows.
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NOW THIS IS NEWS

Pirocco · Apr 10, 2013

It's more of an excuse to sell gold.
See, they don't say to media that they sell gold to push down the price.
They give made-up reasons.
Alike the IMF that sold gold so-called to pay its adminstration bills and to help funding some poor African governments.

tiddleyetom · Apr 10, 2013

THe Cyprus gold is more like the reason although this is also in the news http://www.goldalert.com/2013/04/gold-price-sinks-1-on-hawkish-fed-minutes/ as gold dives today

GOLD PRICE NEWS Gold prices fell nearly 1% following the release of the minutes from the March 19-20 Federal Open Market Committee (FOMC) meeting. The price of gold sank $14.00 to $1,571 per ounce as investors sold gold in anticipation of the end of quantitative easing. Silver fell in concert with its sister precious metal, falling $0.30 to $27.67 per ounce. The U.S. dollar rallied on the news, rising against the euro and most of its foreign counterparts. Stock prices climbed across the board with the S&P 500 advancing 17.05 to 1585.66.
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House · Apr 10, 2013

Bloomberg reports that banks such as Goldman Sachs received the FOMC minutes early by "accident"

Banks including Citigroup Inc. and Goldman Sachs Group Inc., along with congressional staff members and trade groups, received potentially market-moving Federal Reserve information 19 hours before the public in a release the central bank called accidental.

The release was "entirely accidental," Smith said. "This was a list of professional contacts that one individual had," she said. "This group of individuals does not in any normal course receive any information early." The mistake was discovered this morning, according to the central bank.

FOMC minutes, which include comments on the committee's discussions about the direction of monetary policy and its outlook for the economy, are among the Fed's most closely scrutinized documents as the panel debates when to stop its third round of bond purchases.
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browski · Apr 11, 2013

In the old days, the Germans would just roll in the tanks to take the gold.
In the modern world, you create a sovereign and bank debt crisis and then buy the gold on the cheap. Genius.

Cyprus has (had) 14 tonne of AU
Ireland has 6 tonne.
Greece has 112 tonne
Spain has 281 tonne
and Portugal has a whopping 382 tonne.
Total: 795 tonne of AU.

Germany has a lazy 3391 tonne.

I'm thinking Spain and Portugal are about to have a fire sale.

browski · Apr 11, 2013

When you decide to take someone's gold; it is not really a discussion.

Asylum · Apr 11, 2013

House said:

Bloomberg reports that banks such as Goldman Sachs received the FOMC minutes early by "accident"

Banks including Citigroup Inc. and Goldman Sachs Group Inc., along with congressional staff members and trade groups, received potentially market-moving Federal Reserve information 19 hours before the public in a release the central bank called accidental.

The release was "entirely accidental," Smith said. "This was a list of professional contacts that one individual had," she said. "This group of individuals does not in any normal course receive any information early." The mistake was discovered this morning, according to the central bank.

FOMC minutes, which include comments on the committee's discussions about the direction of monetary policy and its outlook for the economy, are among the Fed's most closely scrutinized documents as the panel debates when to stop its third round of bond purchases.
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hilarious!

BlackSheep · Apr 11, 2013

Bullion Baron said:

So much misinformation comes across the newswire...
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So true, and the cynic in me can't help but wonder if it isn't accidental. :/ (not just the leaked minutes, but the misinformation in general)

When you consider that we now live in the Information Era, it's not difficult to see how the use (and abuse) of information can be a very powerfull tool (or weapon)

Jislizard · Apr 11, 2013

How can you own that much gold and still be in debt?

Serious incompetence.

And now it been announced that a boat load of gold is about to hit the market! Why didn't Cyprus just remint kookaburras if they wanted to wind us up?!

Still, once this lot of gold has flooded the market and been mopped up then gold prices will rise again, surely

JulieW · Apr 11, 2013

It's the trillions

http://www.sprottgroup.com/thoughts/articles/a-retort-to-soc-gens-latest-gold-report/

This relationship between central bank printing and gold has existed since the beginning of the gold bull market in 2000. In fact, this relationship shows that for every US$1 trillion increase in the collective central banks' balance sheets, the price of gold has generally appreciated by an average of US$210/oz.

Somewhat surprisingly, it turns out that the collective central bank balance sheets have actually shrunk over the past three months by approximately US$415 billion. The biggest drop was seen in the ECB's balance sheet, which shrunk by the equivalent of US$370 billion, while other central banks also experienced small declines. Based on our simple model above, a decrease of US$415 billion should produce a gold price decline of roughly US$87/oz. And as it turns out, gold fell by US$76/oz over the first quarter of 2013. Does this sound like a bubble to you? It certainly doesn't appear to be. Gold is performing almost exactly as it should by acting as a currency barometer for the amount of money being injected into or withdrawn from the economy... which leads us to Japan.

Japan's recent QE announcement is a thing of wonder. It represents an absolutely massive injection of yen relative to the size of the Japanese economy. The Bank of Japan's US$75 billion equivalent per month of yen printing, coupled with the US Federal Reserve's $85 billion per month (through its current QE program) will addUS$1.97 trillionto the collective central bank balance sheets over the next 12 months. Given Japan's considerable contribution, we seriously question how SocGen believes gold can drop to US$1,375/oz by the end of the year. For that to happen, we would need to see a collective balance sheet decline of roughly 15%. Does SocGen seriously believe the US Fed (or any other central bank for that matter) is going to reverse its QE accumulation and then start aggressively selling balance sheet assets over the next year?

The only gold 'crash scenario' that makes sense to us at Sprott is if governments begin to balance their budgets and return to sound money practices. There is no question that gold could lose its utility if western governments made a concerted effort to fix their fiscal imbalances, but who honestly believes that's going to happen any time soon? We certainly don't especially in the US. While US deficit spending may diminish in scale, it will remain well above $1 trillion per year after factoring in unfunded obligations. We don't know of any creditable forecaster who believes otherwise.

We also don't see a chance of the US Federal Reserve ending its QE programs, despite the continual jaw-boning by various Fed officials of a planned QE exit strategy. There is simply too much risk to the US bond market for the Fed to cut the US$85 billion in monthly Treasury and MBS purchases that the current program employs. After all remember that those purchases are what keep interest rates close to zero today. If the Fed were to remove that flow of capital, the free market would once again dictate US bond yields and stock prices. There's not a chance the Fed will take the risk of finding out what US bonds or stocks are worth to the market without a perpetual government-induced backstop. Why take the risk? Especially since the cumulative QE programs to date have not caused a drastic increase in inflation expectations.

While we expect the Fed to continue to threaten to lower its monthly QE purchases, we believe the chances of even a mild decrease to its current US$85 billion per month rate are negligible. Four years into it this grand QE experiment, money printing has become the backbone of the US bond market, and the unsung driver of the US equity market. In our view, gold cannot become irrelevant for the precise reason that QE is here to stay and the collective central bank balance sheets will continue to increase over time. We would question any pundit who believes otherwise unless they can clearly articulate how the Fed can exit QE without causing irreparable harm to the very financial markets the QE programs were designed to assuage.

We believe gold is nowhere close to 'bubble territory' today. It is acting exactly as a currency should. Under its current stewardship, we expect the Federal Reserve's balance sheet to continue to expand along with Japan's. SocGen's "crash" scenario would require a complete reversal of this trend, which we do not believe is even remotely possible at this point.

Gold is the base currency with which to compare the value of all government-sponsored money. Investors can incorporate it into their portfolios as 'central bank insurance', or ignore it entirely. Either way, we believe gold will continue to track the total aggregate of the central bank balance sheets of the US, UK, Eurozone and Japan. If SocGen believes the aggregate central bank balance sheet will continue to shrink as it did in Q1, then gold should continue its decline. We strongly suspect that shrinkage is over, however. Given Japan's recent QE decision, we would expect the aggregate to grow a lot bigger, and fast. If there was ever a time for gold to be a relevant currency alternative it's now.
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Makes sense to me.

hussman · Apr 11, 2013

So is this why we saw the price of gold and silver drop drastically in the last couple of weeks? To get more bang for buck for buying Cyprus' Gold reserves? Can anyone shed some light.

JulieW · Apr 11, 2013

Jim Sinclair has a bit to say:

"Today was a coordinated attack on gold. We had the Goldman Sachs recommendation to short gold. We also had the Federal Reserve Open Market Committee notes quite unusually released before the opening. Then we had the mainstream media focus on the sale of Cyprus gold, and Mrs. Lagarde on the wire telling people everything was fine with the economy.

The market in gold has significantly changed.

"It's no longer the investment banks vs a community of investors who feel that gold is undervalued, but rather it has shifted, as you can see in trade figures, to major accumulation by sovereign central banks such as Russia and China.

It is also important to note that in Europe gold has been marked-to-market as far as their reserves are concerned. So the focus of today's totally transparent attempt to discredit gold is that, yes, it will have an effect on the paper market, but it will have no effect whatsoever on the physical market where in fact the sovereigns trade.

Sovereigns don't trade on the COMEX, they never would. Rather sovereigns trade in the physical market in London and elsewhere, and they take delivery of the gold they have purchased.

The intention of central planners is to remove concern from the general public.
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from KWN

House · Apr 12, 2013

Apparently it's official now, Cyprus will sell its piddly little 400m (10.36t) worth of gold.

Cyprus officials have agreed to sell around 400 million euros in excess gold reserves to help finance part of its bailout, according to various news reports which cited a draft report of the country's financing needs.
The plan is contained in the official Debt Sustainability Assessment of the country's financing needs, prepared by the European Commission, according to draft reports seen by Reuters and the Financial Times.
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Is this a special case or will Italy and Portugal be forced to do the same? Very bearish for gold if this is the case :/

Restrictions Eased

With a decree published by the finance ministry on Thursday, Cyprus extended capital controls by an additional week but also eased some restrictions.

Bank transactions of up to 300,000 euros have been allowed domestically and it has raised the threshold for company payments abroad to 20,000 euros from 5,000 euros without prior vetting.

It has also permitted travelers to take 2,000 euros abroad from 1,000 previously. However other restrictions, such as a cash withdrawal limit of 300 euros per day, remained in place.
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thatguy · Apr 12, 2013

I think this will be bullish for gold as the sovereigns will need their gold back to sell it. Unless they just do a bit of creative "allocating" accountancy a change ownership in paper only. I suspect the new owners (read china/ecb) will want it in their grubby paws on it. Amerika is going to be drained (if it has anything to drain)

Phiber · Apr 12, 2013

thatguy said:

I think this will be bullish for gold as the sovereigns will need their gold back to sell it. Unless they just do a bit of creative "allocating" accountancy a change ownership in paper only. I suspect the new owners (read china/ecb) will want it in their grubby paws on it. Amerika is going to be drained (if it has anything to drain)
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INteresting angle you have here - could be a pretty tricky situation

theiain1 · Apr 25, 2013

http://www.reuters.com/article/2013/04/23/us-cyprus-minister-interview-idUSBRE93M08V20130423

Cyprus is not giving priority to a sale of gold reserves under the international bailout agreed this month and is still exploring all options to meet its side of the deal, Finance Minister Harris Georgiades said in an interview.
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Cyprus To Sell 400 Million In Gold To Finance Part Of Its Bailout

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