Daily Nugget – Swiss show off their gold

Despite rumours of an international bailout for Cyprus in the early hours, gold continued to climb. Once the bailout was agreed gold dropped 0.4%, but remains strong at $1,607 thanks to investors seeing the Eurozone troubles as clear reason to buy gold bullion.

Earlier today gold did hit a 1-week low ($1,602), however jewellery purchases in Asia helped pick it back up again.

According to the World Gold Council’s managing director for India, gold consumption in India is set to climb this year and may total 865 metric tons to 960 tons compared with 864.2 tons in 2012.This is despite the levies now placed on gold buying by the Indian government.

The decision to increase gold buying is most likely down to high inflation – which has risen almost 9% in three years.

Eurozone contagion helps gold

The bailout agreement, reached by Cyprus and the troika and ratified by finance ministers, will see 10 billion euros of emergency loans. This makes the country the fifth EU nation to receive a rescue package in order to avoid default.

In exchange for the bailout, Cypriot President Anastasiades has agreed to shut the Cyprus Popular Bank, the nation’s second-largest bank – 84% of which is government owned.

Banks will remain closed until further notice whilst capital controls are likely to be imposed in order to prevent a run on the banks. One could argue that such controls have already been in place, given the ‘bank holiday’. However an IMF blessed capital control would pose far greater problems – sending a signal out to other troubled Eurozone countries that their cash may also not be safe.

As Allister Heath points out in his column today, ‘capital controls are an economic and political disgrace,’ as they remove a major tool of protest for citizens. They can no longer express their disgust at the management of a country by exiting – either themselves or their money.

This week look out for numbers on Spain’s finances. Prime Minister Rajoy indicated last week that he was finding it difficult to cut the budget deficit with little economic growth to support such a task. He is requesting more time from the Eurozone in order to tackle the budget deficit.

Uncertainty is likely to continue in the Eurozone, given Italian political uncertainty and the Cyprus situation. Attention will be turned this week to the economic data – which is likely to mirror last week’s dire PMI readings.

Gold set for big monthly gains

Gold remains on course for its biggest monthly gain since September. The metal remains down in the majority of currencies; however renewed Eurozone fears have spurred investors to predict we may see similar gains in gold this year to those seen in 2008.

Following last week’s announcement that a petition had been presented to Switzerland requesting the repatriation of gold reserves and prevention of gold sales, hours later (in a similar fashion to the Queen in the Bank of England film) a television channel gained access to a Swiss National Bank gold vault in Switzerland. Propaganda campaign anyone?

Over the weekend our gold price calculators have proved particularly popular, if you haven’t tried them yet have a play with them. Here you can see all the different ways you could value gold against cash, and how high gold could really go.
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About the Author

Jan SkoylesJan Skoyles is Head of Research at The Real Asset Company, a platform for secure and efficient gold investment. Jan first became interested in precious metals and sound money when she met Ned Naylor-Leyland whilst working alongside him in the summer of 2010. Jan then went on to write her undergraduate dissertation on the use of precious metals in the monetary system. After graduating from Aston University in 2011 Jan joined The Real Asset Co research desk. Her work and views are now featured on a range of media including BBC, Reuters, Wall Street Journal, Mail on Sunday, Forbes and The Telegraph. She has appeared on news channels including Russia Today to discuss the gold price and gold investing. You can keep up with Jan's commentary by subscribing to our RSS feed Gold Investment News.View all posts by Jan Skoyles