Gold Price Up on US Inflation Data as Cyprus Says Gold Sale "Only an Option"
Tuesday, 7/16/2013 13:03
The GOLD PRICE neared 3-week highs above $1295 per ounce Tuesday morning in New York, gaining after new data showed US inflation accelerating in June.
Earlier the finance minister of Cyprus had said selling some of its gold reserves was "only an option" and wasn't yet decided, putting in a doubt the proposal from mid-April which many traders as key to the spring's drop in gold prices.
"The possibility of selling gold is known, but only as an option," Harris Georgiades told journalists in Nicosia.
"It will be considered, when the time comes, with options, or rather, all other options."
Cyprus president Nicos Anastasiades had said Friday that "I want to believe there will never be such a need" for gold sales.
"The issue is not being discussed by the government, it is a responsibility of the central bank," he was quoted by Reuters.
Mid-April's proposal that
Cyprus should sell some of its small gold reserves saw the gold price drop more than 15% over the next two trading days.
Despite holding only 13.9 tonnes of gold bullion, the proposal of a Cyprus gold sale was seen by some analysts and traders as
"the thin end of the wedge" for other debt-laden countries in the Eurozone.
All told, Eurozone central-bank gold reserves total 10,783 tonnes.
That's more than one ounce in every three held in official-sector bullion vaults according to data compiled by the World Gold Council.
April's initial gold sales plan, proposed by Cyprus' other Eurozone partners, the European Central Bank and the International Monetary Fund, was intended to raise €400 million of a total €10 billion rescue package for the Mediterranean island state.
The same quantity of gold bullion if sold at Tuesday's AM London Gold Fix would have raised only €314 million.
"The April price moves [after talk of Cyprus' gold sale] severely damaged the notion that gold provides any degree of risk protection or really acts as a safe haven," says a new gold price forecast from analysts at Citigroup.
"We see little prospect of investors returning to gold in the short or medium term," they add, forecasting a fresh 3-year low of $1100 per ounce by end-2013.
Technical analysis of the gold price charts by Barclays sees gold falling to that level in just the next two months.
Meantime Tuesday, silver followed the
gold price higher, regaining the $20 per ounce level, while European stock markets reversed earlier gains.
Commodity prices also rose, as did major government bond prices.
Today's US consumer price inflation report showed gasoline as well as health-care costs rising, taking the headline rate to 1.8% annually.
But "[gold] investors remain sidelined," reckons Xiang Nan, analyst at CITIC Securities Futures Co. in Shanghai, quoted by Bloombwerg, "before Bernanke's testimony [to Congress on Wednesday] for clues on the Fed’s stance on monetary stimulus."
"Gold price gains are expected to stall around $1300 as physical buyers stay away."
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