Savings Confiscation Risks ‘Bank Runs’ – Highlights Importance of Owning Gold

Today’s AM fix was USD 1,599.50, EUR 1,236.09 and GBP 1,057.45 per ounce.
Friday’s AM fix was USD 1,593.25, EUR 1,219.39 and GBP 1,051.23 per ounce.

Gold rose above $1,600/oz for the first time in more than two weeks on news of the savings confiscation in Cyprus. The euro fell against all currencies and particularly gold. Gold in euro terms rose 1.8%, from €1,218/oz at the close on Friday to €1,240/oz in trade late this morning.

 The radical ECB, IMF, EU bank levy and ‘bailout’ package for Cyprus threatened to trigger fresh turmoil in the euro zone, which will lead investors and savers to seek safety in gold. The deposit levy plan in Cyprus may be the spark that gold needed to overcome its recent weakness and commence the next phase of the bull market.

Savers in the periphery nations of the EU, such as Spain, Italy, Portugal and Ireland, will likely choose to diversify some of their life savings from bank deposits into gold.

Up until now bank deposits were sacrosanct and had government ‘guarantees’ but these guarantees look less safe after this deposit levy plan.

Savers in countries whose governments have welcomed the savings confiscation measure will be especially worried about the safety of their “government guaranteed” deposits.

The move shows the importance of being diversified and again highlights gold’s role as a safe haven asset in uncertain times.

The dawn raid on the wealth of the ordinary people of Cyprus, including hard working families and businesses, may mark the beginning of the end of the Euro project as the Troika have unwittingly attacked the very cohesion of the euro itself.

They have effectively segregated one European people from another and exposed the hypocrisy at the heart of the German and Nordic countries and may by extension have created a Northern euro and and a Southern euro.

It flies in the face of the very foundation of the European Union, ideals forged in the European Union Charter of Fundamental Rights where its signatories, including Germany, swore "to promote balanced and sustainable development and ensure(s) free movement of persons, goods, services and capital, and the freedom of establishment."

In the short term, programme country depositors can no longer be sure that their deposits are safe which will provide a new, potentially significant, demand for gold.

Every time a programme country misses a programme target or starts negotiations to finance its debt, the spectre of savings confiscation will loom creating the an ongoing risk of bank runs.

This will act as an inhibitor to growth and progress and stymie negotiations. The option of pulling out of the Euro will now become politically popular. The net gain from the Cyprus deal is minuscule in comparison with the potential costs to the Euro zone.

A policy of raiding citizens bank accounts will undermine every countries financial system and central bank and it sets a dangerous precedent. How will Spanish savers greet negotiations with the IMF and how will they begin to withdraw their savings from the already fragile Spanish banking system.

Once again the ECB, the IMF and the EU elites have looked after the interests of banks and institutions over those of ordinary people. Corporatism is alive and well and it threatens our banking systems and capitalism itself which cannot function without a healthy banking system.

For breaking news and commentary on financial markets and gold, follow us on Twitter.

NEWS
Gold Climbs Above $1,600 as Cyprus Turmoil Spurs Haven Demand
http://www.bloomberg.com/news/2013-03-17/gold-climbs-above-1-600-as-cyprus-turmoil-spurs-haven-demand.html

PRECIOUS – Gold hits 2-1/2-week high on Cyprus bailout worries
http://www.reuters.com/article/2013/03/18/markets-precious-idUSL3N0CA09720130318

Euro, Stocks Drops; Gold, Treasuries Rally on Cyprus
http://www.bloomberg.com/news/2013-03-17/u-s-stock-futures-euro-decline-on-cyprus-turmoil-yen-gains.html

Euro sinks on Cyprus deposit levy plan
http://www.marketwatch.com/story/euro-sinks-on-cyprus-deposit-levy-plan-2013-03-17?siteid=YAHOOB

Facing Bailout Tax, Cypriots Rush to Get Their Money Out of Banks
http://www.nytimes.com/2013/03/18/business/global/facing-bailout-tax-cypriots-rush-to-get-their-money-out-of-banks.html?pagewanted=1&_r=2&smid=tw-nytimesbusiness&partner=socialflow&adxnnlx=1363522395-WWfQo3UeSnuV3g8RzRAKSg&

COMMENTARY
Hegemonic Germany and the Death of Trust in Banking
http://brianmlucey.wordpress.com/2013/03/18/hegemonic-germany-and-the-death-of-trust-in-banking/

The Cyprus bail-out: Unfair, short-sighted and self-defeating
http://www.economist.com/blogs/schumpeter/2013/03/cyprus-bail-out?fsrc=scn/tw_ec/unfair_short_sighted_and_self_defeating

The Cyprus Precedent
http://blogs.reuters.com/felix-salmon/2013/03/16/the-cyprus-precedent/

The Rape Of Cyprus By The European Union & The IMF
http://www.zerohedge.com/news/2013-03-17/rape-cyprus-european-union-imf

Mark O'Byrne

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