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17 Apr, 2013 14:21

Cyprus must approve €400mn gold sale – Finance Minister

Cyprus must approve €400mn gold sale – Finance Minister

Cypriot Finance Minister Haris Georgiades forecasts a sale of ‘excess’ Cypriot gold reserves ‘during the next months’, but the Central Bank remains opposed.

The Finance Minister says he believes the government’s gold sale of €400 million  ($525-million), of ‘excess’ gold reserves in order to secure 10 billion euro aid from Cyprus’s Troika of lenders, will materialize.

He told Bloomberg,“The exact details of it will be formulated in due course primarily by the board of the Central Bank,” adding, “obviously it’s a big decision.”

Cypriot officials confirmed the plan last week, but the Central Bank has rejected the notion, and the Central Bank chief Panico Demetriades said  last week that the Cypriot government didn’t have the right to sell gold without his direct consent, and said he hadn’t been consulted on the sale.

“There is an issue and it’s actually a major issue,” Georgiades said about the sale.

“The government will do whatever is needed to ensure “smooth and effective cooperation between all decision- making authorities,” he continued.

Georgiades did not elaborate on how much gold Cyprus might sell nor at what price, but it’s rumored they will sell 75% of their reserves. According to the World Gold Council, the Central Bank holds 13.9 metric tons.

A wrinkle in the Cypriot bail-out plan arose last week when a leaked document indicated the total cost of the bailout had risen to €23bn, up from the original €17bn estimate, leaving the beleaguered Cypriot government in a scramble to raise an additional €6 billion ($7.85 billion). Most of the funds are expected to come from depositors in banks, but Cyprus also hatched a plan to sell about €400 million ($525-million) worth of gold reserves.

Gold the not-so-precious metal

The gold market took a catastrophic fall after the announcement, and in the past week has plunged more than $200 an ounce, breaking both the $1,500 and $1,400 thresholds, reaching a 30-year record low in just 2 days.

Morgan Stanley has cut its 2013 gold forecast by 16%, down to $1,487, as investors continue their selling frenzy.

The sell-off “has all the hallmarks of panic-driven, stale long liquidation, stop-loss and capitulation selling in the face of a concerted short sale” Peter Richardson, a Morgan Stanley analyst, wrote in a report.

"In the case of the [Cypriot] gold, it's down to the board of the central bank. It's perfectly understandable.. They have the final say," said Georgiades.