GOLD FEELING PRESSURE OF CYPRUS



Gold is holding above $1,600 even as concerns develop over the new Cyprus agreement. “Although there is still some uncertainty around the details of the Cyprus deal, the assumption is that it will now be finalized and will meet the conditions that the EU expected and that puts pressure on Gold,” SocGen analyst Robin Bhar said. Analysts suggest there should have been a greater draw to the yellow metal, as Europe’s September 2011 financial crisis caused. The market has reacted a bit more cautiously this time around, patiently awaiting a solution that would prevent contagion to surrounding countries.

The market is perturbed with Dutch Finance Minister Jeroen Dijsselbloem’s response to future financial troubles abroad and how international depositors could be held responsible. Dijsselbloem commented on future bailout plans, saying, “If the bank can't do it, then we'll talk to the shareholders and bondholders, we'll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders.” Investors are concerned about putting their money in international investments, especially if they will be accountable to assist another country’s financial woes.

At 5:00 p.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1606.60, Down $2.00.
• Silver, $28.88, Up $0.12.

CYPRUS BAILOUT RALLIES MARKETS, LOWERS GOLD

The stock market is heading for a positive open this morning after eurozone financial leaders secured an 11th hour deal bailing out Cyprus. ICAP in London strategist Chris Clark said, “The market’s reaction to the deal has been positive but hardly amounts to a tidal wave of relief.” Last week, trading was overshadowed by the situation in Cyprus but with a deal now in place the immediate fear of contagion has eased. Failure to reach a deal could have led to a complete collapse of Cyprus’ banking system and the country’s exit from the eurozone.

In a classic example of the inverse relationship Gold has with risk-based assets, Gold dropped to its lowest point in a week after the Cyprus deal was struck. Investors take what they consider to be positive news and unload safe haven investments, like Gold, to move to riskier assets. Some investors had begun to buy Gold as the Cyprus situation ignited fears of another eurozone debt crisis. That seems to have been resolved and according to Peter Fertig, consultant at Quantitative Commodity Research, “Sentiment [for Gold] remains still negative as there is this assessment that improving economic activity and higher equities would make Gold less attractive in coming months.”

At 9:00 a.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1595.30, Down $13.30.
• Silver, $28.69, Down $0.08.

GOLD PRICES REACT TO CYPRUS BAILOUT

The tiny European island nation of Cyprus dominated many of the financial headlines this week, and as of today there has been no resolution to the country’s financial crisis. Cyprus is in the midst of a financial collapse and is in dire need of aid from larger international banks. The European Union has stepped up and is willing to assist in financing a bailout plan. However, the EU is requiring that Cyprus pay back part of the loan with a tax on bank deposits. Ilya Spivak, currency strategist at DailyFX said the Cyprus bailout plan “has pushed the euro sharply lower at the start of the trading week amid rising fears of mass capital flight.” He continues on to say that investors across the zone could scramble to move their capital out of the region. The easing proposal was met with much resistance by the government of Cyprus. “At this point in time, we are saying [to international lenders] that if you think that by doing this you are fixing things, by actually destroying our economy and one of the biggest and strongest financial sectors we had on this island, then we have to say ‘no’,” said Efi Xanthou, international relations secretary of the Cyprus Green Party. As of today Cypriot lawmakers are voting today on bills that would strike a deal with European partners after talks with Russia fell apart. The controversial tax on bank deposits is the key issue that parliament will debate. Banks in Cyprus reopen on Tuesday, and there is a real concern that capital will begin to flow out of the beleaguered country. The European Union issued the Cypriot parliament an ultimatum saying they need to raise 5.8 billion euros by Monday to receive their bailout package. Without the deal, Cypriot banks will be cut off from the liquidity of the European Central Bank. Bill Blain, senior fixed income broker at Mint Partners, said “Cyprus could be let go if they don't come up with a robust enough package. If they come up with something half-baked, that will be rejected and they will be let go. If they come up with something that clearly cuts higher deposits and puts money back into the banks and go about bank restructuring, that may work.” The Gold price has been rising as the trouble in Cyprus unfolds. Safe haven buying prompted investors to push the Precious Metal to as high as $1,616.36 an ounce in overnight trading. When priced against the euro, Gold is up 2.6 percent so far this week.

UNITED STATES FEDERAL RESERVE NOTES

On Tuesday the latest policy meeting of the Federal Open Market Committee began. HSBC said in a note, “(We) expect the FOMC to reaffirm its commitment to the current quantitative easing policy and to offer no hint that it will alter the policy in the near term … Uncertainties surrounding the potential withdraw of QE contributed to Gold's sell-off earlier this year. Given this, clarity on the FOMC's QE exit strategy may help ease such concerns and lend support to Gold.” Federal Reserve Chairman Ben Bernanke promised to uphold the Fed’s $85 billion in monthly bond purchases on Wednesday. Few are surprised by the Fed’s announcement as the current unemployment rate of 7.7 percent is still far from the 6.5 percent target. Bernanke has committed to maintain the current stimulus program until the U.S. jobless rate has reached the desired target. Some Federal Reserve officials have been open critics of the need for a continuation of such aggressive monetary policy, but the majority of members still see the current easing measures as necessary to impel U.S. economic recovery. Bernanke noted that a scale down of the quantitative easing (QE) program is far from imminent as officials predict desired levels of unemployment will not be reached until at least 2015. On Thursday morning the United States jobless claims report was released. While the claims did move up, the move was not as much as anticipated. Analysts had expected a rise of about 10,000 claims in reality it was closer to 2,000 claims. This report lends cause for the U.S. Federal Reserve to keep pushing forward with its monetary easing plans. “Gold is positively reacting to the Fed saying that quantitative easing will not end any time soon and there is also uncertainty of what is going on in Cyprus,” Saxo Bank senior manager Ole Hansen said. Gold has reacted positively when easing is in play and today is no different.

At 4:00 p.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1,610.10, Down $6.20.
• Silver, $28.79, Down $0.50.

U.S. MINT ON PACE FOR RECORD SALES YEAR

Precious Metals prices are mostly flat in morning trading, keeping nearly the same position as this morning’s prices. Silver’s movement today is the largest drop for the metal in three weeks. The main news driving prices continues to be the situation in Cyprus. Lawmakers in the eurozone country continue to debate the unique measures involved in a potential bailout. Cyprus is still hoping for help from Russia either in conjunction with or instead of eurozone countries and the International Monetary Fund. A decision from the country is reportedly due on Monday, March 25.

The U.S. Mint is on pace to sell 52.8 million ounces of Silver in 2013, which would be an all-time record. The fact that Silver’s price has fallen since January has some analysts confused, as it appears that demand is still quite high. As far as investment demand, Silver ETFs have actually added to their stockpiles over the past three months. Silverseek.com analyst David Baker believes that “Silver investors should take solace in the growing divergence between the Silver spot price and the investor demand implied by the ETF inflows and U.S. Mint coin sales.”

At 12:06 p.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1,608.60, Down $7.70.
• Silver, $28.71, Down $0.57.

CYPRUS STILL ON UNCERTAIN FOOTING

Cypriot lawmakers are voting today on bills that would strike a deal with European partners after talks with Russia fell apart. The controversial tax on bank deposits is the key issue that parliament will debate. Banks in Cyprus reopen on Tuesday, and there is a real concern that capital will begin to flow out of the beleaguered country. The European Union issued the Cypriot parliament an ultimatum saying they need to raise 5.8 billion euros by Monday to receive their bailout package. Without the deal, Cypriot banks will be cut off from the liquidity of the European Central Bank. Bill Blain, senior fixed income broker at Mint Partners, said “Cyprus could be let go if they don't come up with a robust enough package. If they come up with something half-baked, that will be rejected and they will be let go. If they come up with something that clearly cuts higher deposits and puts money back into the banks and go about bank restructuring, that may work.”

The Gold price has been rising as the trouble in Cyprus unfolds. Safe haven buying prompted investors to push the Precious Metal to as high as $1,616.36 an ounce in overnight trading. When priced against the euro, Gold is up 2.6 percent so far this week. Shortly after hitting is high earlier, Gold began to fall. Investor sales of ETFs seem to be stronger than the fears of a Cyprus meltdown. Year to date, Gold holdings in the SPDR Gold Trust are down 9.6 percent.

At 9:23 am (EDT), the APMEX precious metals spot prices were:

• Gold, $1607.20, Down $9.10.
• Silver, $28.71, Down $0.58.

NEW PROPOSAL IN WORKS FOR CYPRUS

Gold is close to a one-month high as the market has been alarmed by worldwide financial decisions this week.  Both the Cyprus bailout and confirmation of the United States Federal Reserve’s continued monetary easing have been reason enough to provide a boost for Gold. “The overnight evaluation of the FOMC (Federal Open Market Committee) statement is being treated a little more bullishly than it was than the first knee-jerk analysis,” HSBC Bank USA’s chief commodities analyst James Steel said. “You still can't discount the safe-haven impact from Cyprus--it hasn't gone away yet.”

The Central Bank of Cyprus Governor Panicos Demetriades unveiled a new proposal in an attempt to save the troubled country from bankruptcy. The measures would “protect bank deposits totaling 100,000 euros ($129,000) or less,” while deposits over that amount would be subject to a deposit tax. “At the current juncture it looks like the more ‘reasonable’ solution would be a combination of factors. Cyprus could decide to mobilize some domestic resources, proceed in the direction of the restructuring of its main banks, and the introduction of a less-strict deposit tax that protects deposits below €100,000 or so,” London’s Newedge Strategy economist Annalisa Piazza said.

At 5:15 p.m. (EDT), the APMEX precious metals spot prices were:

• Gold, $1616.40, Up $6.40.
• Silver, $29.21, Up $0.33.

GOLD DOWN SLIGHTLY DESPITE CONTINUED EASING

Gold is down for the first time in five sessions even as Federal Reserve Chairman Ben Bernanke promised to uphold the Fed’s $85 billion in monthly bond purchases. Few are surprised by the Fed’s announcement as the current unemployment rate of 7.7 percent is still far from the 6.5 percent target. Bernanke has committed to maintain the current stimulus program until the U.S. jobless rate has reached the desired target. Some Federal Reserve officials have been open critics of the need for a continuation of such aggressive monetary policy, but the majority of members still see the current easing measures as necessary to impel U.S. economic recovery. Bernanke noted that a scale down of the quantitative easing (QE) program is far from imminent as experts predict desired levels of unemployment will not be reached until at least 2015.

The three-session losing streak for equities ended today as the Fed’s unwavering commitment to QE remains the central factor driving markets. “The Fed essentially did what’s to be expected, which is to reinforce that the economy still needs support,” said Hank Herrmann, chief executive officer of Waddell & Reed Investment Management Co. Past announcements of continued easing have been integral in boosting Precious Metals and stocks, but recent releases have been expected and thus less jarring to Gold and Silver prices in particular. The current price range Gold has settled into is seen as an excellent buying opportunity for many investors as the indefinite perpetuation of loose monetary policy is expected to be bullish for the metal long-term.

At 4:01 p.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1,608.50, Down $5.20.
• Silver, $28.87, Down $0.05.