The Cypriot government may sell part of its gold reserves within the next few months, admitted Finance Minister Haris Georgiades on Wednesday, bringing truth to earlier speculation that Cyprus would be forced to sell its gold to meet its creditors’ demands.
Georgiades, in an interview with Bloomberg, said that the final decision would have to be approved by the nation’s central bank, but the government will do whatever is needed to ensure “smooth and effective cooperation between all decision- making authorities.”
“Obviously it’s a big decision,” told Georgiades to Bloomberg. "In the case of the gold, it's (the decision is in) the board of the central bank. It's perfectly understandable. They have the final say.”
“[But] obviously some decisions of the central bank will be examined” by an independent commission,” he added.
The announcement will not be welcome news to gold traders after the price of the precious metal plunged by more than $200 an ounce over the past week, with speculation of Cyprus’s sale cited as one of the key factors.
Subsequently, Morgan Stanley also cut its 2013 gold forecast by 16 percent, over a selling frenzy among investors.
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.
Although Georgiades did not elaborate on how much gold Cyprus might sell nor at what price, earlier rumours predicted that they could sell up to 75 percent of their reserves.
Central bank chief Panicos Demetriades however tried to assuage concerns last week when he told the press that the Cypriot government did not have the right to sell gold without his consent. He also signalled the administration hadn’t involved him in the plan.
But with Georgiades latest admission, concerns are likely to grow once again on the gold market. An April 9 debt assessment by the European Commission said that Cyprus had committed to selling around 400 million euros ($523 million) of “excess” gold reserves, but the Central Bank of Cyprus swiftly denied the claim.