Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
S&P Stock Market Trend Forecast to Dec 2024 - 16th Apr 24
No Deposit Bonuses: Boost Your Finances - 16th Apr 24
Global Warming ClImate Change Mega Death Trend - 8th Apr 24
Gold Is Rallying Again, But Silver Could Get REALLY Interesting - 8th Apr 24
Media Elite Belittle Inflation Struggles of Ordinary Americans - 8th Apr 24
Profit from the Roaring AI 2020's Tech Stocks Economic Boom - 8th Apr 24
Stock Market Election Year Five Nights at Freddy's - 7th Apr 24
It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- 7th Apr 24
AI Revolution and NVDA: Why Tough Going May Be Ahead - 7th Apr 24
Hidden cost of US homeownership just saw its biggest spike in 5 years - 7th Apr 24
What Happens To Gold Price If The Fed Doesn’t Cut Rates? - 7th Apr 24
The Fed is becoming increasingly divided on interest rates - 7th Apr 24
The Evils of Paper Money Have no End - 7th Apr 24
Stock Market Presidential Election Cycle Seasonal Trend Analysis - 3rd Apr 24
Stock Market Presidential Election Cycle Seasonal Trend - 2nd Apr 24
Dow Stock Market Annual Percent Change Analysis 2024 - 2nd Apr 24
Bitcoin S&P Pattern - 31st Mar 24
S&P Stock Market Correlating Seasonal Swings - 31st Mar 24
S&P SEASONAL ANALYSIS - 31st Mar 24
Here's a Dirty Little Secret: Federal Reserve Monetary Policy Is Still Loose - 31st Mar 24
Tandem Chairman Paul Pester on Fintech, AI, and the Future of Banking in the UK - 31st Mar 24
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Jumps Over $1600 as Cyprus Bail-Out Hits Bank Savers

Commodities / Gold and Silver 2013 Mar 18, 2013 - 08:19 AM GMT

By: Adrian_Ash

Commodities

WHOLESALE GOLD leapt 1% against the Dollar and 2.3% against the Euro at the start of Asian trade Monday, as global shares sank and major-government bonds rose following the Cyprus bail-out deal announced by European politicians at the weekend.

"[German negotiators] were hand in hand with Finns," says an unnamed official quoted by the Financial Times, "who were much more dogmatic" in forcing a levy worth €7 billion on ordinary bank depositors as part of the €17bn deal.


"Scenes of Cypriots lining up at cash machines raised the specter of capital flight elsewhere," says Bloomberg, while Reuters claims that today's Bank Holiday may be followed by a forced shutdown on Tuesday to allow parliament to discuss and vote on the depositor levy, priced at 9.9% of savings accounts over €100,000 and 6.7% below.

"It's as if the Europeans are holding up a neon sign," writes economist Paul Krugman in his New York Times blog, "saying 'Time to stage a run on your banks!'..."

"[This is] the first example of deposit hair-cuts during the entire Euro crisis," says forex strategist Jens Nordvig at Nomura.

The Cyprus deal "has potential to make depositors in Portugal, Spain and Italy nervous, despite likely assurances from policymakers," he writes.

Weaker Eurozone government bonds fell hard Monday morning, driving Greek interest rates half-a-percentage point higher, while base metals dropped alongside crude oil.

First hitting a 13-session high above $1608 per ounce, Dollar prices to buy gold then slipped back as European stock markets followed Asia in dropping over 1%.

The gold price in Euros jumped 2.3% at the start of Asian trade, hitting 5-week highs above €1240 per ounce as the single currency hit new 3-month lows vs. the Dollar.

Gold priced in Sterling held flat, however, as the British Pound surged nearly 2 cents to $1.51 on the foreign exchange market.

"One of the reasons gold has been coming off," says UBS analyst Tom Price, "is that there has been a view that the risk in Europe was limited and most of their financial market issues were resolved.

"This uncertainty could provide a brand new support for gold for days or even weeks."

Further ahead, "Global liquidity is rising," says London market-maker HSBC, trimming its 2013 average gold forecast from $1730 per ounce to $1700 but noting that "the Bank of Japan has joined the QE party and the Fed shows no let-up.

"Inflation tolerance and currency wars are supportive [of gold]. We expect stronger jewelry and coin demand, lower scrap supply [and] an end to ETF liquidation."

Investors in gold-backed trust funds led by the $63-billion SPDR Gold Shares cut their holdings last week for the 5th week running, reducing overall exchange-traded gold fund holdings to a new 6-month low of around 2,500 tonnes.

On the futures market, however, speculative traders grew their exposure to rising prices as a group in the week-ending last Tuesday. Latest data from US regulator the CFTC says the net long position of bullish minus bearish bets rose 7.4% from early March's 54-month low, the fastest jump since September.

"To sustain gold prices at $2000 by 2016", says analysis from investment bank Merrill Lynch, investors would need to buy gold in quantities equal only to 2008 – almost 50% below 2011's record 1,700 tonnes – thanks to "steady increases of spending on non-essential items like jewelry in more affluent emerging markets."

By Adrian Ash
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in