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Cyprus News Turns Advantageous for Gold

March 18, 2013 at 15:46 by Andriy Moraru

Gold turns out to be one of the best performing asset following the unprecedented (at least in modern developed economies) bank deposit levy planned by the Republic of Cyprus. The precious metal was among few rising commodities today setting a new monthly high.

9.9% one-time tax for accounts bigger than €100,000 and 6.75% one-time tax for accounts holding less than that amount will be discussed by the Cypriot parliament tomorrow. It is a part of the bail-out plan proposed by the European Union. The country’s ATMs are now stormed by the deposit holders who hurry to withdraw their money from the banking system.

Gold looks to be a natural winner in this story. While euro is losing to the US dollar on the news, the gold is gaining even in dollar value. Although this deposit tax might be a necessary step to save the the Cypriot economy, it is a bad signal to traders and investors worldwide, which will decrease the level of trust in the global financial system (driving the appeal of physical gold up) and make them seek safe haven investment vehicles.

Gold spot price rose from $1,592.20 to $1,607.30 per troy ounce as of 15:46 GMT today, rising as high as $1,611.13 about two hours ago — the highest level since February 27. The metal has already gained about 1.6 percent this month.

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