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Gold Knocked Over By Cyprus And FOMC

BySaxo Bank
AuthorSaxo Bank
Published 04/11/2013, 11:07 AM
Updated 03/19/2019, 04:00 AM
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The metal sector remains stuck with negative momentum although industrial metals and silver have witnessed a small recovery up until yesterday. Silver's ratio to gold has fallen from 57.9 last week back down to 56.5 primarily due to the confidence in gold receiving another knock yesterday. News that Cyprus as part of its effort to fund its bailout would consider selling a large share of its gold reserves together with relative hawkish minutes from the recent meeting of the U.S. Federal Reserve knocked over whatever confidence had been build since last Friday's weak U.S. employment report leading to the biggest daily fall in five months.

Why Cyprus?
The reason why the Cyprus news, which was later denied, made such an impact was primarily due to the timing. The news came at a time when investor sentiment towards gold's prospect has become increasingly frail. As such the amount of EUR 400 million worth of gold is a tiny amount and equates to less than two percent of the average daily volume traded on the futures exchange in New York. But the concern it may raise is that this could create a precedent and be copied by other and much bigger nations in their efforts to shore up their finances. Such a move could undermine one of the few pillars of support for gold at the moment: central bank buying.

Elsewhere we saw no major changes with both crude oils (Brent and WTI) holding onto negative momentum while Live Cattle turned negative and sugar saw its negative momentum slow and a break back above 18 cents/lb could create some further positive vibes around the sweetener.
Commodity Momentum

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