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As if precious metals markets needed any more bad news, word came yesterday that the Central Bank of Cyprus may sell about 10 tonnes of its gold reserves in order to fund the nation's bank rescue.

There remains a good deal of confusion about this story and, like a lot of other gold market developments lately, you can't help but wonder if the entire financial system along with the global financial media are out to get the yellow metal.

The news was first broadly disseminated in this Reuters story on Wednesday afternoon and, given the opening paragraph, you can see why this worsened an already sour mood in the gold market, coming on the same day that investment bank Goldman Sachs recommended clients short the metal.

Cyprus has to sell excess gold reserves to raise around 400 million euros ($523 million) to help finance its part of its bailout, an assessment of Cypriot financing needs prepared by the European Commission showed.

There doesn't seem to be any doubt about Cyprus selling more than a half billion dollars of its gold and, for hours afterward, markets believed this to be the case.

Of course, this only added to what was already a bad day for the metal as the gold price ended almost $30 an ounce lower.

As it turns out, Cyprus may still end up selling a good portion of its gold reserves, but these sales are anything but certain as detailed in these reports that followed:

In fact, this report at Reuters today contradicts much of what was in yesterday's initial report as is clear in the opening paragraph:

Cyprus said a sale of its gold reserves was among the options for its own contribution towards an international bailout, but said the ultimate responsibility for that rested with its central bank.

It is not known why so much of the initial story was in error, but one thing is clear - it's getting much easier for gold investors to be paranoid these days with this sort of financial news reporting taking place.

Naturally, yesterday's initial report prompted all sorts of doomsday scenarios about countries like Italy, Spain, and Portugal also selling off some of their massive 3,000+ tonne gold reserves to help their ailing economies and reduce their budget deficits.

But, this is already being dismissed today by most news accounts, yet Reuters saw fit to add to this speculation in the following story:

They are likely doing what every news organization does - printing sensational headlines to attract more page views in an increasingly competitive environment - but, you'd think they would tone it down a bit after getting some basic facts wrong in their initial report yesterday.

Whatever happens to the 10 tonnes of Cyprus gold, there are a few important points that are worth considering.

First, the Central Bank of Cyprus has far more gold reserves than it really needs since, according to the latest World Gold Council data, their 13.9 tonnes of gold account for 63 percent of their central bank reserves.

This is far more than the 10 to 20 percent rule of thumb for central banks and selling 10+ tonnes of their gold reserves would put them right into the middle of the broadly accepted range. That's why these are being called "excess reserves" and, all things considered, this is not an unreasonable thing to be thinking about given the dire predicament the Cypriot banking system is in.

Second, this would mark the biggest bullion sale by a eurozone bank since the Bank of France sold over 17 tonnes of gold in early-2009. After selling about 400 tonnes of gold reserves per year under a gold sale agreement that spanned more than a decade, European central bank gold sales ground to a halt after the 2008 financial crisis and, since then, flows have reversed as emerging market central banks last year racked up net purchases of over 500 tonnes.

These Cyprus gold sales would be a drop in the bucket compared to the ongoing central bank gold purchases. Moreover, given their relationship with Russia, officials in Cyprus may find a ready and willing buyer as the Russian Central Bank added some 75 tonnes to their gold reserves last year and this could end up being just another 10 tonnes of gold that moves from the West to the East.

Given the rate that China is believed to be adding to its gold holdings (somewhere between 100 and 500 tonnes per year, but a figure they'll not release for years so as not to cause the price to move higher), these Cypriot gold sales are really inconsequential.

Inconsequential, that is, for gold's global supply and demand, but not for market sentiment.

Disclosure: I am long GLD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. I also own gold coins.