Posted on 26 March 2013
Gold has held above $1,600 and silver hovers close to $29 an ounce after the Cyprus banking deal, despite a rally in the US dollar and a fall in the euro. But the real action will come in the reaction by bank depositors and investors to the fall-out from the Cyprus debacle.
Never before in a eurozone banking bailout have depositors’ funds been touched. Cyprus has helped itself liberally to deposits above 100,000 euros. Those held in the inappropriately named Cyprus Popular Bank have been wiped out completely and up to 40 per cent lost from larger deposits with the Bank of Cyprus.
Bank runs
This sets a new precedent for what is possible in EU bank bailouts. Wealthy depositors need to watch out. Holding large amounts of money in the banks of any country with debt problems is therefore not advisable. There is going to be a run on all these banks, to a greater or lesser extent.
What will depositors do with their cash? Part of it will undoubtedly go straight into an account in a safer country, say Germany. But there is a strong liklihood that precious metals will also be a money of choice for these people. This is a money that no bank can get its hands on as gold and silver do not have a counterparty, their value is intrinsic.
It will not be an overnight move but one dragged out over many months as depositors stop and think and take action. Many will read articles like this one. Others will hear about the problem from friends or neighbors or see the news on TV.
Silver supply
Why will silver benefit? Well there are two metals that are used as money, gold and silver, and stock piles of silver are much smaller than the reserves of gold held mainly by the global central banks. It therefore takes fewer buyers of silver to push the price up than gold.
Indeed, it is an observable fact that the silver price outperforms gold in a rising market. Just consider the ten-fold increase in the price of silver in the current bull market for precious metals compared with five to six times for gold.
It is thus only logical to conclude that if the Cyprus banking debacle is going to prove positive for the gold price then silver prices are going to benefit even more.
ArabianMoney
Gold has held above $1,600 and silver hovers close to $29 an ounce after the Cyprus banking deal, despite a rally in the US dollar and a fall in the euro. But the real action will come in the reaction by bank depositors and investors to the fall-out from the Cyprus debacle.Never before in a eurozone banking bailout have depositors’ funds been touched. Cyprus has helped itself liberally to deposits above 100,000 euros. Those held in the inappropriately named Cyprus Popular Bank have been wiped out completely and up to 40 per cent lost from larger deposits with the Bank of Cyprus.
Bank runs
This sets a new precedent for what is possible in EU bank bailouts. Wealthy depositors need to watch out. Holding large amounts of money in the banks of any country with debt problems is therefore not advisable. There is going to be a run on all these banks, to a greater or lesser extent.
What will depositors do with their cash? Part of it will undoubtedly go straight into an account in a safer country, say Germany. But there is a strong liklihood that precious metals will also be a money of choice for these people. This is a money that no bank can get its hands on as gold and silver do not have a counterparty, their value is intrinsic.
It will not be an overnight move but one dragged out over many months as depositors stop and think and take action. Many will read articles like this one. Others will hear about the problem from friends or neighbors or see the news on TV.
Silver supply
Why will silver benefit? Well there are two metals that are used as money, gold and silver, and stock piles of silver are much smaller than the reserves of gold held mainly by the global central banks. It therefore takes fewer buyers of silver to push the price up than gold.
Indeed, it is an observable fact that the silver price outperforms gold in a rising market. Just consider the ten-fold increase in the price of silver in the current bull market for precious metals compared with five to six times for gold.
It is thus only logical to conclude that if the Cyprus banking debacle is going to prove positive for the gold price then silver prices are going to benefit even more.
ArabianMoney
