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Gold Consolidates Around $1600 Ahead of Long Weekendby Peter A. Grant
Mar 28, AM 
Gold remains choppy around the $1600 level ahead of the long holiday weekend. The yellow metal eased along with the dollar as the euro rebounded back above the 1.28 level. The reopening of Cypriot banks after a nearly two-week "bank holiday" went fairly smoothly, but tensions remain high. Banking transactions are severely limited by capital controls and this is expected to be the case for some time as a means to prevent a wholesale withdrawal of deposits. However, it would a lot of euros managed to escape confiscation. According to Reuters, "No one knows exactly how much money has left Cyprus' banks, or where it has gone." Laiki and Bank of Cyprus branches in London "remained open throughout the week and placed no limits on withdrawals." Additionally, Bank of Cyprus owns 80% of Russia's Uniastrum Bank, which put no restrictions on withdrawals in Russia. Makes one wonder if these loopholes were intentional or just a colossal oversight. Analyst and author John Maulden quotes a well connected European source in his Thoughts From the Frontline newsletter, who suggests the eurozone "bank-deposit guarantee is worthless in a number of cases." There is no deposit insurance mechanism for the eurozone as a whole, mostly because Germans know that if such a thing were implemented, they'd be left holding the bag. It is therefore up to the individual countries to provide the insurance for depositors and clearly there are a number of countries that simply don't have the money to do so. Depositors in places like Greece, Italy, Spain, Portugal, Ireland and even France, would be well advised to reevaluate their risks with a far more critical eye. What I found particularly unnerving about the events over the last two-weeks is that banks deposits — particularly those over any deposit insurance threshold — are suddenly considered an "investment" in the bank, subject to losses if things turn sour. And yet, apparently not subject to gains if the bank is doing well. Depositors in the U.S. should go through the same exercise, because you now assume your bank deposits are safe at your own peril. I'm sure many in Cyprus made that miscalculation only to wake up last week to find their bank closed, and the Cypriot government and the troika negotiating over how much of their money would be confiscated. Most of our clients buy gold for the purposes of long-term wealth preservation, it is a form of savings to them. Perhaps more importantly, in light of what's transpiring in Cyprus, it is savings removed from the banking system. NEWSLETTER SIGN-UP Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. USAGOLD, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD does not warrant or guarantee the accuracy, timeliness or completeness of the information found here. |
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