Gold News & Info

Source: Dr. Bill Musgrave, American Gold Exchange

Washington— Gold gained 0.8% to finish above $1,604, its highest close since late February, as the terms of a proposed bailout of Cyprus reawaked fears of debt contagion in the eurozone. European finance ministers and the IMF agreed to give $13 billion in aid to debt-riddled Cyprus on the condition that its citizens forfeit 10% of their bank deposits. Though not yet approved, the proposal is already triggering flights of capital out of Cypriot banks, jeopardizing the county�s strained financial system. The euro and international stocks fell on the news as investors scrambled for safe-haven refuge in the U.S. dollar and gold. Silver added 0.1% while platinum and palladium dropped 0.8% and 1.4%, respectively.

At the Comex close: April gold gained $12 to $1,604; May silver added 2 cents, to $28.87; April platinum lost $13.20 to $1,579.20; and June fell $10.80 to $764.85 an ounce.

The �deposit-tax� in Cyprus marks the first time since the start of the eurozone debt crisis that individuals would be required to pay for their government�s insolvency–despite the fact that the deposits are guaranteed to be safe. Goldman Sachs has speculated that this bailout could serve as a template for other struggling governments as they look for ways to become solvent. If the idea spreads, massive amounts of capital are expected to flee eurozone banks, adding to the potential for debt-contagion and default. Demand for alternative stores of value like gold, which exist outside of the banking system, is likely to surge

The eurozone debt crisis was a primary driver behind gold�s rise to a record high above $1,920 in September 2011. Over the past six months, fears of spreading insolvency largely subsided as the region�s most precarious economies�Greece, Italy, and Spain�stabilized behind bailouts and promises from ECB president Mario Monti that the central bank will �do whatever it takes� to save the euro. Monti�s vow may soon be tested. Bank runs in Cypress could spread across the eurozone and undermine the region�s fragile balance. In that scenario, gold could easily reach new all-time highs.