The gold price started the week performing well rising to $1590, its highest level since the start of the month. But then yesterday the gold bulls ran out of steam and the price once again retested that $1555 which has been a great area of support for nearly two years.
Gold $ (15 min):
On the longer term gold chart we can see just why the $1555 zone is so important.
Gold $ (daily):
So why did gold make another retest of that key level of support? The sell-off came on the same day that it was announced that Cyprus would have to sell 75% of their entire gold reserves as part of the Cyprus bailout raising some €400m euros.
This news was very unexpected because there was no mention whatsoever about gold during the height of the Cyprus crisis.
So, just how much is 75% of total Cypriot gold?
More than 10 tons of gold.
Which means that Cyprus will go from having the 59th largest gold reserves on the planet all the way to…
… number 80, leaving it with just 3.5 tons of gold.
The move is really rubbing salt in the wounds of the people of Cyprus who have seen many lose nearly all their savings and now face an almost guaranteed depression with the Troika now predicting the economy to contract by nearly 9% this year alone.
Having a large gold reserve relative to their size meant that leaving the Euro was actually viable because they could use their gold reserves to semi-back any new currency and quickly bring stability to it.
Now that option seems to have been completely taken away from Cyprus – perhaps that was the plan all along with the ‘bailing-in’ of their gold.