Cyprus & Gold – Noise vs Facts

When it comes to gold, we would say that 2013 is already the year of disinformation. The winners are obviously the mainstream media. It appears that in the era of information explosion, the world is facing an acute information shortage, worse than the coming silver shortage.

Reuters released today a news item about Cyprus’ gold holdings (source):

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

Now let us be very clear on this. The Central Bank of Cyprus today announced openly and officially that no talks are ongoing  about this matter, see next paragraph.

The Cyprus News Agency released today a knee jerk reaction on the report from Reuters (source):

The Central Bank of Cyprus has made it clear that any sale of its gold reserves concerns the Bank and nobody else. The sale of gold held by the Central Bank is a matter that concerns exclusively the Board of Directors of the Bank,” Aliki Stylianou has told CNA, invited to comment on a Reuters report saying Cyprus has agreed to sell excess gold reserves to raise around 400 million euros and help finance part of its bailout.

What does it tell about the reliability of news coming out of mainstream media related to gold? Correct, the mainstream media simply do not understand the gold market, set aside the dynamics within the precious metals market.

Now, apart from the fact that Reuters reported an outright lie or huge error, we thought it was appropriate to put the potential sale of Cyprus gold holdings into perspective. This is a purely hypothetical exercise simply to show the limited understanding related to gold by the mainstream media.

Suppose Cyprus would sell 400 million euro’s worth of gold. With a gold price near 40,000 euro’s per kg, the total amount of gold would be 10,000 kg, which equals 10 tonnes. Figures are rounded to make the point. Now let’s put this figure into perspective to get an idea of its potential significance:

  • Total above the ground gold on the world is 170,000 tonnes. Past year, an additional 2,700  tonnes was mined (excluding Russia & China, as their mined metal is not available to the rest of the world).
  • The top 6 gold holdings by countries (as of December 2012) and institutions (more recent figures), all of them published earlier by Gold Silver Worlds:
    1. 8,133 tonnes by the US
    2. 3,391 by Germany
    3. 2,814 by the IMF
    4. 2,451 by Italy
    5. 2,435 by France
    6. 1,200 by the ETF SPDR GLD
  • In 2012, China announced to have bought officially more than 800 tonnes (it is widely accepted that this figure is higher in reality, but let’s stick to the official facts).
  • In February 2013 alone, China had imported through Hong Kong a staggering 97.106 tonnes of gold (source, news released today).

So what is the fuzz about: 10 tonnes of gold that would potentially be sold by a country in a historic crisis? And if it would be correct that news about Cyprus would be moving the gold price, what about today’s news out of China that it imported 97 tonnes in February?

We would suggest that gold journalists at Reuters better take the time to research and write about the truth, rather than making assumptions on the gold price dynamics. It is about time to fill the wires with truthful news. It would be more appropriate to quote James Steel, who rightfully wrote the following (source):

Gold goes where the money is; it came to the United States between World Wars I and II, and it was transferred to Europe in the post-war period. It then went to Japan and to the Middle East in the 1970s and 1980s and currently it is going to China and also to India.

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