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Euro Gold +2.5% In Week – Deposit Withdrawal Restrictions And Capital Controls Cometh

GoldCore's picture




 

 

 

Today’s AM fix was USD 1,611.50, EUR 1,246.62 and GBP 1,059.99 per ounce.

Yesterday’s AM fix was USD 1,608.75, EUR 1,246.42 and GBP 1,059.43 per ounce.

Gold climbed $8.70 or 0.43% and closed yesterday at $1,614.40/oz. Silver reached $29.31 and finished +1.29%.

Gold is slightly lower in all major currencies this morning but remains near a 4 week high, underpinned by safe haven demand due to concern of a financial meltdown in Cyprus and the risk of contagion in other European countries.

Gold bullion is headed for its second consecutive weekly rise and its biggest weekly rise in four months.

Gold is 1.4% higher in dollar terms and 2.5% higher in euro terms. In British pounds, gold has consolidated after the gains seen in sterling in recent weeks and is 0.8% higher for the week.

The clock is ticking for Cyprus to come up with a solution to clinch an international ‘bailout’, otherwise it could face the collapse of its financial system and exit from the euro zone.  

There is a slow but creeping realisation that this crisis will almost certainly escalate. Financial contagion could ensue due to risks to payment systems and bank deposits which are often guaranteed by near insolvent governments. 

Events in Cyprus look like that they could precipitate bank runs in Greece, Spain and Italy with obvious negative ramifications for the entire EU banking and financial system.

Senior euro zone officials acknowledged in a confidential conference call yesterday that they were "in a mess" and discussed imposing capital controls to insulate the currency area from a possible collapse of the Cypriot economy.

In Brussels, a senior European Union official told Reuters that an ECB withdrawal would mean forcing Cyprus to abandon the euro.


Gold In EUR, 10 Day - (Bloomberg)

The ECB has warned of the "great danger" of a bank run once banks reopen next week and has said that they may enforce capital controls overriding the government of Cyprus. Other draconian restrictions on people's private property include an indefinite “freezing” of savings accounts, making bank or wire transfers dependent on central bank approval and lower ATM and bank deposit withdrawal limits.

While, the capital controls will be designed "so that citizens have access to sufficient cash to go about their lives", they are likely to lead to a further collapse of consumer confidence in Cyprus and the collapse of commerce as businesses are greatly hampered in carrying out every day business activities.

This is not the first time this has happened in the EU and unfortunately, it will not be the last time.

Only last June, the Bank of Italy authorized the suspension of payments by Bank Network Investments Spa (BNI) without communicating anything to depositors. The BNI, a large Italian bank, suspended operations and clients with bank accounts could not write checks, pay bills, make mortgage payments, and use ATMs or debit and credit cards.    

At the time, it was reported that not alone was the EU considering imposing a limit on the amount of money that can be withdrawn from ATMs but they were also considering imposing border checks and introducing currency controls to stop a flight of capital out of European countries.

As well as limiting cash withdrawals and imposing capital controls, the EU discussed suspending the Schengen Agreement, which allows for visa-free travel among 26 countries, including most of the EU, though not Britain and Ireland. 

While EU officials may again manage to patch things up and not implement such extreme measures in the short term, unfortunately extreme measures seem quite likely in the long term given the scale of the crisis in the EU.  There is also the risk of Japan, the UK and U.S. seeing their various debt crises deepening in the coming months and similar capital controls are more than possible.

These are risks that we have long warned of and it gives us no pleasure to see them come to pass.


Gold In USD, 10 Day - (Bloomberg)

However, people who own physical bullion in their possession and in safe storage internationally remain positioned and prepared for these threats.

These real risks have huge implications and ramifications that most have yet to fully consider and comprehend.

The silly debate as to whether gold is a safe haven or not, or a bubble or not, will be seen for what it is very soon.  

Those, such as Paul Krugman, Nouriel Roubini and Warren Buffett, who have suggested gold is a barbaric relic, is a bubble and is not a safe haven, and have dissuaded investors from diversifying some of their wealth into gold, will be shown to have misled investors and savers  and will lose credibility. 

They will no doubt engage in some furious back pedalling and claim that “nobody saw this coming” when indeed there have been many financial and economic analysts warning about exactly these risks for years.

Rather than sitting nervously and passively and awaiting the coming financial dislocations and expropriations, investors and savers need to be prepared for the uncertain financial scenarios that seem increasingly likely.

One of the most published academics on gold in the world, Dr Brian Lucey of Trinity College Dublin (TCD) wrote yesterday that "the research evidence is that gold is usually a safe haven asset”. 

 


Gold In GBP, YTD - (Bloomberg)

 

Lucey pointed out how physical gold is financial insurance or a hedge against political uncertainty:

“Interestingly financial gold, such as ETFs etc are useful as safe havens against economic events and physical gold against political events. Both are in play in Cyprus and so the safe haven nature of gold should continue to provide comfort for purchasers."

Hoping for the best, but preparing for less benign scenarios remains prudent.

For breaking news and commentary on financial markets and gold, follow us on Twitter.

NEWS   
Gold Seen Extending Rebound as Cyprus Revives Bulls – Bloomberg

Gold heads for biggest weekly rise in 4 months on Cyprus – Reuters

Gold futures pause after gains –  Market Watch

Shanghai Bourse Mulls After-Hours Trade in Gold, Silver – Fox Business

COMMENTARY
Video: Gold Fundamentals "Absolutely Intact" - $1,800/oz By September – Business Week)

Getting Beyond the Fed – NY Sun

"It Is Only In Safe Hands If It Is Kept In Switzerland" – Zero Hedge

President Nixon: The Man Who Sold the World Fiat Money – CFA Institute

Video: Texas May Start Hoarding Gold…Secession Next? - Yahoo

 

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Fri, 03/22/2013 - 12:58 | 3362678 Fips_OnTheSpot
Fri, 03/22/2013 - 12:06 | 3362407 steve from virginia
steve from virginia's picture

 

 

 

I've put this up before, elsewhere:

 

http://www.economic-undertow.com/wp-content/uploads/2013/03/Unholy-Trini...

 

ZeroHedge won't let me post charts 'n' graphs! C'mon ZeroHedge!

 

The God-like Unholy Trinity which determines the course of foreign exchange for all countries including those in Europe. A country can have an independent monetary policy, it can maintain a currency peg with another country or countries and it can enjoy the free flow of capital across its borders. It can effect two of these -- or two can be denied -- but never all three at once.

 

The worth of money is determined -- not by central banks -- but by its voluntary exchange for a valuable physical good on demand ... at gasoline stations around the world millions of times a day. Even with policy rates set to zero and the all-out lending to governments by central banks there is no independent monetary policy ... anywhere. The worth of money is determined by its exchange for crude and crude products and nothing else. The only policies that central banks can effect are those that make matters worse.

 

The euro is not a currency in the sense that it is the product of a nation named 'Europe', rather it is the collection of currencies of individual European nations that all happen to be called the euro. These currencies are all pegged to each other, a source of Europe's misery as there is no way for the individual euros to be repriced independently of the others.

 

Europe has the pegged currencies and no independent monetary policy: all that remains is the free flow of capital or not across European borders ... that is, bank runs.

 

Bank runs are baked into the cake to some degree because of the use of the European Stability Mechanism (ESM) which is a credit-laundering machine to allow the ECB to make unsecured loans. Such loans are fatal to the central bank because it has insufficient capital and its assets are the same assets that have bankrupted the various commercial banks. Once implemented -- due in April -- here is no effective lender of last resort in Europe. The ECB is simply another insolvent European commercial lender.  

 

Keep in mind, if states impose capital controls -- to restrain the free flow of capital -- there is no more peg which means no more euro!

 

Right now the EU is in the process of killing the euro with capital controls in order to prevent the death of the euro banking system by way of bank runs.

 

Fri, 03/22/2013 - 11:59 | 3362381 rlouis
rlouis's picture

The distinction between economic events and political events is subtle - but worth considering as the wave rolls out from the EU towards the British Commonwealth and the US.  It suggests that global coordination of the central banks isn't quite politically powerful enough to implement global capital controls simultaneously.

Fri, 03/22/2013 - 12:16 | 3362445 shovelhead
shovelhead's picture

The US needs a Cypriot terrorist attack first before the cap controls kick in.

We're sticklers for legality over here.

Fri, 03/22/2013 - 11:58 | 3362373 stuckonarock
stuckonarock's picture

for anyone who would like to remain reasonably sane during the coming storm i would recommend that as well as investing most fiat in PMs and withdrawing from most things digital, that some form of relaxation techniques, meditation, prayer may be useful to keep a calm head whilst preparing in whatever way you can.  There is stillness at the centre of the circle, inside ourselves all is well, start finding that place now, good luck to everyone, everything happens for a reason, the old must crumble before the new can arise, all will play out as destiny decides, spend time contacting friends / relatives you have put off contacting, build friendships, community, stay close to the earth.

 

GOOD LUCK EVERYONE

 

 

Fri, 03/22/2013 - 13:33 | 3362821 yabyum
yabyum's picture

If that does not work try whiskey and ganga.

Fri, 03/22/2013 - 13:34 | 3362831 yabyum
yabyum's picture

Just kidding! What ever gets you through the night.

Fri, 03/22/2013 - 13:19 | 3362750 Bring the Gold
Bring the Gold's picture

I haven't logged in on this site in ages. I just wanted to say bravo and very well said. May all beings find peace, love and forgiveness within their being. All is one and as the immortal Bill Hicks said:

 

The world is like a ride at an amusement park, and when you choose to go on it, you think it's real because that's how powerful our minds are. And the ride goes up and down and round and round; it has thrills and chills and it's very brightly colored and it's very loud and it's fun... for a while. Some people have been on the ride for a long time, and they begin to question: "Is this real, or is this just a ride?" And other people have remembered, and they come back to us, and they say, "Hey - don't worry, don't be afraid -EVER- because, this is just a ride." And we... KILL those people HAHAHA! "Shut him up! We have a lot invested in this ride - SHUT HIM UP! Look at my furrows of worry! Look at my big bank account, and my family! This just HAS to be real!"... But it's just a ride. And we always kill those good guys who try and tell us that, you ever notice that? And let the demons run amok? Jesus - murdered; Martin Luther King - murdered; Malcolm X - murdered; Gandhi - murdered; John Lennon - murdered. But it doesn't matter because: It's just a ride. And we can change it anytime we want. It's only a choice. No effort, no work, no job, no savings of money. A choice, right now, between fear and love. The eyes of fear want you to put bigger locks on your doors, buy guns, close yourself off. The eyes of love, instead, see all of us as one. Here's what we can do to change the world, right now, to a better ride: Take all that money that we spend on weapons and defense each year and instead spend it feeding and clothing and educating the poor of the world, which it would many times over, NOT ONE HUMAN BEING EXCLUDED, and we could explore space, together, both inner and outer, forever, in peace. 

Fri, 03/22/2013 - 11:48 | 3362328 Never One Roach
Never One Roach's picture

<<Other draconian restrictions on people's private property include an indefinite “freezing” of savings accounts, making bank or wire transfers dependent on central bank approval and lower ATM and bank deposit withdrawal limits.

While, the capital controls will be designed "so that citizens have access to sufficient cash to go about their lives", they are likely to lead to a further collapse of consumer confidence in Cyprus and the collapse of commerce as businesses are greatly hampered in carrying out every day business activities.

This is not the first time this has happened in the EU and unfortunately, it will not be the last time.>>

 

How to say, "Ouch!" in Cypriot?

Fri, 03/22/2013 - 12:18 | 3362459 thisandthat
thisandthat's picture

Euro!

Fri, 03/22/2013 - 11:45 | 3362304 Melin
Melin's picture

"so that citizens have access to sufficient cash to go about their lives"

 

Done and done.

Fri, 03/22/2013 - 11:28 | 3362223 JOYFUL
JOYFUL's picture

If you need an academic to tell you to get out of fiat and get into gold, it's probably already too late...just pass the remaining time before the government arrives to 'help you'  in careless abandon.

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