Gold drops on Cyprus bullion sale plan

LONDON Wed Apr 10, 2013 9:29pm IST

Women look at jewellery at the gold market in Riyadh, March 11, 2013. REUTERS/Stringer/Files

Women look at jewellery at the gold market in Riyadh, March 11, 2013.

Credit: Reuters/Stringer/Files

Related Topics

LONDON (Reuters) - Gold slipped to session lows on Wednesday, pressured as European Commission documents showed Cyprus plans to sell 400 million euros' worth of reserves to finance part of its bailout - a move that marks the biggest euro zone bullion sale in four years.

Although obstacles stand in the way of euro zone central banks selling gold to meet financing needs, the Cypriot move will focus attention on other heavily indebted euro zone gold holders.

The sale plan, set out in a draft assessment of Cypriot financing needs prepared by the European Commission, would be the first major gold disposal by a euro area central bank since France sold 17.4 tonnes of gold in the first half of 2009.

"The amount mentioned, 10 tonnes, is not large - we've seen that on average come out of exchange-traded funds this year every week," Macquarie metals analyst Matthew Turner said.

"But it's the first euro zone country to have said it will do this, and the first euro zone country to sell gold, other than Germany's coin programme, for a while."

At current prices, 400 million euros' worth of gold amounts to 10.36 tonnes of metal. Cyprus' total bullion reserves stood at 13.9 tonnes at end-February, according to data from the World Gold Council.

Spot gold hit a low of $1,567.54 an ounce and was down 1 percent at $1,568.46 an ounce at 1521 GMT. Gold priced in euros was down 1 percent at 1,199 euros an ounce.

Central banks have been keen buyers of gold since the advent of the financial crisis, acquiring a net 532 tonnes of gold last year, a 48-year high, according to metals consultancy GFMS.

Portugal holds 382.5 tonnes of gold, worth some 14.76 billion euros at current prices, in its reserves, while Spain's holdings stand at 281.6 tonnes, worth 10.8 billion.

Italy is the world's fourth largest gold holder, with 2,451.8 tonnes of gold in its reserves, worth 94.6 billion euros.

"A bearish interpretation would be, where Cyprus leads, others will follow," Turner said. "If those others were Spain or especially Italy, they have very large reserves. But there are good reason to think in this, as in other aspects, Cyprus is a special case."

"No country's gold reserves are sufficient on their own to make more than a small (difference) in their debt position, and they probably think holding gold reserves is better than selling them... if there is a risk you may leave the euro."

(Editing by Veronica Brown and William Hardy)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Market Eye

Sensex, Nifty rise to second consecutive record high

Sensex, Nifty rise to second consecutive record high

The BSE Sensex and Nifty on Friday rose to their second consecutive record highs. The 30-share Sensex surged as much as 1.3 percent to an all-time high of 27,706.80. The broader Nifty gained as much as 1.28 percent to a record of 8,275.15.  Full Article 

REUTERS SHOWCASE

Cost Cutting

Cost Cutting

PM Narendra Modi boots officials out of the first class cabin  Full Article 

Airtel Profit Jumps

Airtel Profit Jumps

Bharti Q2 net profit more than doubles   Full Article 

Leisure Riding

Leisure Riding

Harley-Davidson woos affluent young Indians with bike culture  Full Article 

Maruti Earnings

Maruti Earnings

Maruti Suzuki net profit up 29 percent, beats estimates.  Full Article 

ICICI Results

ICICI Results

ICICI Bank Q2 profit up 15 percent, beats estimates.  Full Article 

Moody's on India

Moody's on India

Moody's welcomes India's policy steps, but wants to see more.  Full Article 

End Of QE

End Of QE

U.S. Fed ends bond buying, exhibits confidence in U.S. recovery.  Full Article 

Cook Comes Out

Cook Comes Out

Apple's Cook: "I'm proud to be gay"  Full Article 

Refining Margins

Refining Margins

BPCL aims to double refining margins with refinery expansion.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage