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Don’t sell the Gold!

Reuters is saying that Cyprus will sell around 400 million euros worth of gold. This is a very bad idea. Let me repeat it. It is a very bad idea to sell the gold reserves.

Cyprus is going down very fast or as Alexantra put it, ‘it is like watching a train wreck in super slow motion’.The gold reserves will be the only thing left to built something out of the ruins. By selling its gold reserves, Cyprus is selling the only asset that can support an alternative currency in the very possible post-eurozone era.

I am not arguing for an exit from the eurozone. I am saying that it is a very realistic possibility that Cyprus will either bankrupt or get forced out of the eurozone. To remove the only asset that can minimise the devaluation of the new pound is a horrible decision. Even the most optimistic economists, those that traditionally support the IMF and the ECB, acknowledge the fact that Cyprus will have a hard ride and that the chances of failure are substantial. To sell the gold means that the government or the Central Bank commits to the eurozone irrespective of what that would mean for the country.

I am wondering who had this brilliant idea. Was it the government or the Central Bank? If it was the CB – as far as I know, it is the latter that can actually sell the gold – what is the position of the government? Does the president agree with the CB? If not, what is he doing to reverse the decision?

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  1. Very true and very right. Selling the gold is the stupidest thing to do! Even here in the Netherlands banks are taking the gold of clients. Meaning that if you still have actual gold in a vault you will since last April 1st be repaid in Euro’s, you can’t get back your gold. That also goes for gold futures. Should you actually want to execute on expiration than the bank will take the gold and you the client will be payed in euro’s. Read the article on zerohedge.com: http://www.zerohedge.com/news/2013-03-24/another-gold-shortage-abn-halt-physical-gold-delivery