Recent world events tell us that gold and silver have lower to go. The events on which gold and silver should have gone higher, precious metals staged only weak bounces. The events on which precious metals should have shown slight weakness, gold and silver fell out of bed.
First let’s examine the events where gold and silver should have gone up.
The founding principle of the euro zone was that it would have a common currency. But now a euro owned by a German is not the same euro when owned by a resident of Cyprus.
When faced with mounting opposition, Cyprus abandoned its plan to impose large taxes on bank deposits. Yes you are reading it right – a plan of taxes not only on interest but on the total amount of deposits. This tax amounted to confiscation of private property without any compensation. After abandoning this plan, Cyprus imposed strict capital controls. Initially people could withdraw a maximum of $300 euros each day from banks. People could not take more than 1000 euros out of the country and overseas credit card transactions could not exceed 5000 euros per month.
Capital controls have now been eased but still remain onerous. Late Sunday night the eights decree was issued in Cyprus. The new decree allows 3000 euro transfers per month within Cyprus. Large depositors in Cyprus are likely to lose a large percentage of their money.
Common sense dictates that what has happened in Cyprus should have sent shivers down the spines of investors and they should have flocked to gold, but they did not.
Even though the probability of a nuclear conflict with North Korea remains low, it cannot be totally ignored. North Korea has a new young inexperienced leader in Kim Jong-un who is pushing to the edge to prove to his population that he is strong. Is it conceivable that this inexperienced leader will not pull back from the edge and start a war?
Under these circumstances, gold should have spiked, but did not.
According to the data compiled by UBS, central banks bought $3 billion worth of gold in the first two months of 2013.…Read more at Forbes
