Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
USDT Ponzi Scheme FINAL WARNING To EXIT Before Tether Collapses Crypto Exchange Markets - 22nd Jun 21
Stock Market Correction Starting - 22nd Jun 21
This Green SuperFuel Could Change Everything For the $14 Trillion Shipping Industry - 22nd Jun 21
Virgin Media Fibre Broadband Installation - What to Expect, Quality of Wiring, Service etc. - 21st Jun 21
Feel the Inflationary Heartbeat - 21st Jun 21
The Green Superfuel That Could Disrupt Global Energy Markers - 21st Jun 21
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Cyprus Crisis, Stock Market and Platinum

Stock-Markets / Financial Markets 2013 Mar 23, 2013 - 12:43 PM GMT

By: P_Radomski_CFA

Stock-Markets

Cyprus lawmakers this week rejected a controversial euro bailout package, which would have set a dangerous precedent by taxing ordinary bank depositors to pay part of the bill. How will it imply the stock market? Will it make platinum any less appealing - especially relative to gold? Let's take a look.

The genie has been let out of the bottle. The fact that a democratic government could propose such a plan is a game changer. Ordinary people everywhere now know that putting their savings into insured bank accounts is no longer a guarantee of a good night's sleep. When governments are in desperate financial straits they will not hesitate to plunder the accounts of ordinary savers and investors. And that make gold all the more attractive.


At issue was a plan for a one-time tax of 6.75% on bank deposits of less than 100,000 euros even though deposits are guaranteed (insured) up to that amount in Cyprus and in most other European countries. In addition, the government wanted to levy a 9.9% tax on Cyprus bank accounts with more than 100,000 euros many of which contain Russian money. Russian banks and businesses have been flooding Cyprus for years taking advantage of low taxes and loose regulations, setting the laundering dial on the fast spin cycle. This decision would have penalized small depositors who are not responsible for the bubble and would have let off the hook the bankers, shareholders and bondholders who supposedly assumed the risks. Worried investors everywhere finally got the point that gold is one of the few safe havens and gold went up $22.8 (1.43%) this week. On Tuesday, for the first time since February 6th, gold was added to the trust for the SPDR Gold Shares ETF (GLD).

Cyprus, like Iceland before it, has an outsized banking sector eight times the size of its economy, which indicates that money flows into its banks without any connection to the local economy. (In other words, possibly some tax evasion and a bit of money laundering.) Just for comparison, U.K. banks are only three times larger than the British economy and London is considered to be a global financial center. Cyprus banks were heavily damaged by exposure to Greece and now Cyprus' entire banking system needs to be capitalized.

Even by just having considered shaving the top of bank deposits, a psychological Rubicon has been crossed raising some serious questions and issues.

The first is why bother having a deposit guarantee if governments can expropriate your deposits? Even though policy makers claimed this would be a one-time event, how can one be sure? If this were to happen in Cyprus, could it not happen anywhere else in the euro zone, Greece, Spain, etc.? Already there is a similar proposal being considered in New Zealand. Without credible deposit insurance it's every person for himself, all bets are off and it's a matter of how fast you can queue up to withdraw your money. With such low interest rates paid on deposits, isn't it safer to stuff the money into the mattress or under the floorboard? And if that's the case, instead of paper money which loses value, wouldn't it be smarter to hold gold? Without the public's trust in the banking system the economy cannot function.

Cyprus is a small country of less than a million people. It joined the Eurozone on January 1, 2008. That decision, to forgo sovereignty of its own currency, sealed its fate. Even though Cyprus backed down from the plan to tax deposits, just bringing it up as a possibility, might have killed its status as an offshore tax haven. But that's what got it into trouble in the first place.

No one knows what will happen next, but none of the options is pretty. Cyprus debt-to-GDP ratio pushed to 127% in the third quarter of 2012. Only Greece (at 153%) has a higher level. It is politically difficult to persuade German taxpayers to finance a bailout of an off-shore money heaven for shady deposits, and can you blame them?

So either Russia will come to the rescue with a fat check, or EU officials will relent when faced with the prospect of a Cypriot exit from the eurozone. Another possibility might be that the Cypriots tax the big accounts and spare the small, mostly local savers. Cyprus has no central bank to prop up its banks like a non-eurozone country does. So the last option is for Cyprus to exit the eurozone and to start printing its own currency.

Without a doubt, the Cyprus crisis is putting a spotlight on the general disillusionment with the European unification project.

Let's move on to today's technical portion to see whether the Cypriot events have had any influence on the general stock market and platinum (keeping in mind that platinum tends to outperform gold when stocks are rallying) - we'll start with the S&P 500 Index long-term chart (charts courtesy by http://stockcharts.com.)

The situation is much the same as last week here, as there has been insignificant reaction to the situation in Cyprus. It seems that investors do not view the situation as being important but we think that it is - and we think that the true impact upon the general stock market is likely still ahead. Technically, the situation in this chart improved this week. RSI levels no longer suggest an extremely overbought condition, so higher stock prices could very well be ahead. Once again, Cyprus could be the game changer depending on what happens and how quickly the current situation is resolved.

Let's turn now to the financial sector - we'll use Broker/Dealer Index as a proxy here.

$XBD Broker/Delaer Index - AMEX INDX

We see that the financials have managed to hold above the 2012 high despite the Cyprus events. This is a positive sign, but with RSI levels close to 70, further consolidation could follow anyway. If we are correct about the Cyprus' impact still being ahead of us, then financials will likely move lower in the coming weeks.

Finally, let's move on to the platinum to gold ratio.

On the above platinum to gold ratio chart, we see that the ratio moved below 1.0 this week but reversed almost immediately. It is now quite close to this very important support-resistance line. At this time, we view this recent move as a rather insignificant phenomenon, but we will continue to monitor the situation here closely, for if stock prices decline, the platinum market could be vulnerable. The outlook for this ratio still appears to be positive at this time, but the comments we made in a Market Alert sent to our subscribers on Wednesday should be kept in mind:

The situation does look concerning for the platinum market as the platinum:gold ratio moves closely in tune with the general stock market - and the positive outlook on the stock market was one of the factors that made us suggest moving from gold to platinum in the previous months. However, Cyprus could be a game changer. It's too early to tell if this should impact your platinum-gold selection, because there's not enough data and because of the plain fact that platinum is once again priced lower than gold which is a 20+ year anomaly.

Summing up, from a technical perspective, the situation in the general stock market improved this week. Stocks consolidated a bit and held relatively well as did the financials. From a pure technical perspective, we should be bullish here but would rather call the situation unclear, because the market appears to have not yet realized the true situation in the Mediterranean Sea. This outlook translates directly into platinum market, as the platinum:gold ratio tends to move in tune with the general stock market.

To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we encourage you to sign up for our gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Gold & Silver Investment & Trading Website - SunshineProfits.com

* * * * *

About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Przemyslaw Radomski Archive

© 2005-2019 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