bankrobberyWednesday afternoon, Reuters reported that Cyprus had agreed to sell 75% (approximately 10 tons) of its gold reserves in order to secure ECB/IMF financing.  In response, the paper gold market immediately rolled over to $1555, and closed the day down $25.
It now appears that the entire report was a fabricated MOPE story purely designed to initiate a paper raid on gold, as official spokeswoman of the Central Bank of Cyprus Aliki Stylianou just flatly denied any of Cyprus’ gold is going anywhere.

 

The Cyprus News Agency has released this reaction to the Reuters story:

Such an issue has not been raised, has not been discussed and is not being discussed at the moment.  The Central Bank of Cyprus has made it clear that any sale of its gold reserves concerns the Bank and nobody else. The sale of gold held by the Central Bank is a matter that concerns exclusively the Board of Directors of the Bank,” Aliki Stylianou has told CNA, invited to comment on a Reuters report saying Cyprus has agreed to sell excess gold reserves to raise around 400 million euros and help finance part of its bailout.

 

So now the question becomes, was the entire story pure MSM fabrication to help the bullion banks smash gold on the release of the Fed minutes (while news that China imported 97 tons of gold from Hong Kong in February was completely ignored), or has perhaps the Troika simply decided that the agreement to the ECB/IMF theft of Cypriot gold reserves by the Central Bank of Cyprus is not necessary?

 

  1. If 10 tons of gold tanks the market by $25, well then,  I crap bigger than that.  But it does make sense that any country that goes hat in hand to the troika must come bearing gifts….Gold is a good one. 
    Question
    How  much gold does Slovenia have?  And Slovakia?  Portugal?   Italy? (2,400 tons).  The Netherlands?
     The beast is hungry and gold feeds its appetite.  Small bites now, more later
     
    I got to thinking of the contagion in the Eurozone like hypothermia.  If a person becomes severely hypothermic, and I’ve experienced that twice, the prescribed treatment is to warm the extremities very slowly.  The vascular system shuts down in the extremities.  The blood supply is reserved for the core and brain.  If you warm the arms and legs by putting someone in warm or hot water, the blood’s  pumped back into the core from  the arms and legs.  The blood in these extremities is still very cold, sometimes 50 degrees or lower.  When the highly chilled blood hits the core the heart. lungs and brain are hit with icy blood and can shut down or go into shock.  This  can cause  death.
    The thing that occurs to me is that the peripheral countries of the Eurozone are frozen; frozen out of the capital markets, with little capital flow inside the country. They are shut down. 
    If these countries start accepting bail ins, in a strange way they are temorarily revived by fresh capital infusions from the ECB.    Their banking system that was formerly shut down restarts with a jolt of liquidity.  They start to show some signs of life even though they are moribund.  But what happens is the smart money leaves, either before the bail in because that is what smart money does, or leaves during the bail in process. Smart money starts fleeing from countries before the bail in proposal ink is dry.
     The smart money; call it the warmed blood, the money that gets out of a country’s banking system before it starts crashing,  starts flowing towards the core.
    This is happening now. 
    Peripheral capital is escaping from the moribund external countries, able to flee in a moment’s notice. It flows to France, Germany, the UK, Switzerland and the northern tier.
    Hundreds of billions of Euros are moving to the core.
    What happens? 
    Those countries monetary systems are ovewhelmed by the flood of currency.  This currency creataes havoc. Currency starts rent seeking, trying to find yield.  It  forces rates to negative levels, causes countries to have to hedge the funds by various experimental efforts to keep their own currency markets from having extreme problems.  The Swiss pegging the Frank to the Euro was one such problem with has had some very bad blowback.
    Switzerlands SNB is in a terrible currency short position trying to stabilize the SW Frank Euro spread and losing badly. Their paper losses are over 10 billion Euros. The bets placed by the SNB are nearly the size of the GDP and the losses are astronomical (and unpayable) If the SNB was private it would be destroyed.
    My opinion is that the bank runs from the PIIGS and other outer countries, and this includes hundreds of billions in Euros from Spain, Italy and even France, will prove to be a terrible burden on the nothern tier including Germany as this flood of ‘hot money’ flows into the vaults and causes some real damage. It is shocking the systems now.
    Everyone is seeking yield in a ZIRP and NIRP world.   B of J is flooding the EU with yen buying the junk bonds to get some return on their carry trade. The Yen Euro cross should be something to see.
    Willie has talked about this as being one of the most important factors in Europe now since the trade levels between the Euro and Japan involves well over 20 trillion in combined GDP.  This alone could end badly.  And if the yen bond purchases are seen as just another financial instrument to use for additional bail ins and hair cuts the end result could be tragic and more destabilizing than anything we have seen yet.  One more problem for the Euro zone IMO
    One more thing could result of the yen tsunami.  If the Fed slows QE they may be thinking that the yen will be the next best buyer of the US Treasuries yielding 1.8%   These bonds are guaranteed by the full faith and credit of the US government.  Besides which, the US bonds ratings are pretty high–right?  AA with a negative outlook. That’s pretty good isn’t it?  Well?

    • “The beast is hungry and gold feeds its appetite.  Small bites now, more later”
       
      You got it, AG… appetizers for now, and then a 6 course meal of:  smaller EU countries, Italy, Spain, France, UK and US.  Yummm… banksters are salivating just thinking about all this looting.  Does raping and pillaging come afterwards for the entertainment?  Probably.
       
      Bonds?  Bonds are debt instruments and the Western world is awash in this crap.  Like anything else available in vast quantity, bonds are cheap… and likely to get even cheaper.  If I could buy a $10 bond for a quarter, I would seriously have to think about it.  For $10?  Not even worthy of consideration.
       

    • @AGXIIK:  your train of logic makes sense and certainly at least some of that is in operation.  But one quick note:

      “Willie has talked about this as being one of the most important factors in Europe now since the trade levels between the Euro and Japan involves well over 20 trillion in combined GDP. “

      20 trillion?  I think you mean 20 trillion Yen, which would be closer to the real number.  I just looked it up. The bilateral trade between the EU and Japan runs at around 145 billion Euros per year. (source: click here — and it’s a 2 page PDF, easy to read and with other interesting stats if you want to check it out)

      Also, I would be surprised if Italy’s gold can be targeted in any similar move.  They did issue gold-backed bonds a number of years ago to bail themselves out of a previous financial crisis.  But it was interesting how fast they paid off those loans to protect their gold. 

      Italy understands gold — as they should, given all the lunacy they’ve had with their currency over the decades.  Even with all the core Euroland bashing of periphery “piigs” nations, when all is said and done, Italy is considered “core” Europe, with Spain close behind.  If the financial attacks go as far as to strategize ways of not just getting gold backed loans like before but actual gold from Italy and Spain, I’ll really be shaking my head as to the depths insanity has reached.  Don’t forget that this all comes within the context of global currency war and the eventual replacement of the dollar as reserve currency.  If German interests were to covet Italian gold, that would truly be tantamount to an admission that the Euro was going to be broken-up because 10 years from now, when and if there’s some form of gold role within an overall new reserve currency trading system, Germany wouldn’t be advantaged by having an Italian side-kick neutered of gold in a world were Asia held the most gold

  2. Heck, with the way things go these days, the story is probably true, and upon denying it, they can rehash it three weeks from now when in need of another round of gold kicking.

    What?  Me?  Conspiracy theorist?  Stranger things have happened.  Look at that whole idiotic Diesel Boom bomb about Cyprus bail-ins as a “template.”  He’s first quoted.  He goes on to deny he used the word nor, presumably, made the implication.  Then, just days later, talk of bail-ins for the rest of Europe is unearthed from other quarters — never mind all the stories SilverDoctors scooped the entire world on re. the FDIC/BOE document and Dodd-Frank and the doc out of Canada (the documents were out there for a long time but never discussed in the media until SilverDoctors blasted the blogosphere).

    We’ve got an interesting little patch in the blogosphere here folks.  There’s room to improve in terms of vetting and journalistic standards.  But all things considered, knowing what I know about how small this operation is, SD is kicking butt :-) 

    • Flying Wombat Thank you for the commentary and other thinking points
      I was referring to the combined GDP of Japan and Eurozone; $5 trillion and $17 trillion.  The effect of the yen devaluation and the shakiness of the Eurozone was my concern. I thought the trade would have been more than $200 dollars.  China’s trade with the zone is much larger and they ware being affected by the economic drop in Europe.
       If the export markets of these two giant GDP’s are shaken by devaluations, the threat of bank bail-ins and the flood of yen buying poor quality Euro bonds, the ripple effects in this $22 trillion combined GDPs could depress the GDP growth to even greater negative prints.  I did read that every country in the Eurozone is showing losses to their GDPs ranging from 1-5%.  Even Germany has stalled. This will make it worse.  Japan’s harsh devaluations are making some big dents in every economy including China.  We don’t seem to pay this much mind in the US or at least I haven’t heard a lot of clamor about this.  But it appears that Japan shifted to another big set of gears as they dropped their currency into a sharper downward curve. 
      The overall effect on Europe is being felt in the FOXEX trades, not that I know much about that subject except to say that it is having some effects that hadn’t been factoring into the European situation.  But these currency wars are having an effect and increasing inflation rates for those countries devaluing their currencies. Japan is seeing some of the worst effects, making their attempts even more heavy handed.
      Everything I read leads me to believe that Japan is in an existential struggle for its economic life, manufacturing base, a cultural lodestar of this powerhouse country. These extraordinarily large manoevers by the B of J, and Abe are having many effects that spread out like the Fukushima event.  And now Japan is buying gold with their yen.  Interesting event in that cycle.
      I then wonder what Japan will require in collateral for their bond purchases?  Will they trade the market in a way to force gold to be sent back home when bets against the yen holdings require forfeiture of the central bank gold holdings.  My worry is Italian banks are teetering.  Bail ins there are inevitable.  I wonder if the Italian government will have the cojones to say nein when the troika comes calling.  Italians are rightfully proud of their heritage, gold ownership and sovereinty. 
      If nothing else, these situations are just more of the same trip wires Willie speaks about.  Cyprus is that little frog in the boiling pot that didn’t jump in time.  It gets us to thinking about who’s next.

  3. Didn’t greece have to pledge their gold as collateral during a previous bailout? So even if they weren’t forced to sell now I think there’s still a huge risk of gold being confiscated from euro members which could be sold into the market and keep the game going for another few years… unfortunately :( But if they fail to keep silver in check their control of gold may break too, so lets hope that finally happens (before long).

  4. I would be shocked if it wasn’t discussed. One point of note, Cyprus would be no doubt ripped off and have their gold marked to market – meanwhile ample information out there suggests large physical deliveries are met with stiff premiums over futures spot price (aka bullshit commoner price). Further exacerbating the rape of cyprus.

  5. http://www.nytimes.com/2012/02/22/world/europe/euro-zone-leaders-agree-on-new-greek-bailout.html?_r=2&src=tp&

    “Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal[...]”
     
    “When things get serious you have to lie”

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