Surprisingly, this has happened at a time when global cues should point to higher gold prices. The Eurozone is stumbling from one crisis to another, but the Cyprus debacle didn't do much for gold. Even the recent sabre rattling by the nuclear-armed North Korea hasn't boosted gold prices, raising questions whether the precious metal has lost its traditional status of a safe haven during uncertain times.
A European Commission assessment of what Cyprus needs to do as part of its European Union/International Monetary Fund bailout earlier this week showed it was set to sell gold reserves to raise around 400 million euros ($525 million). While Cyprus' gold sale in itself is small, heavily indebted euro zone nations such as Italy and Portugal could also find themselves under increasing pressure to put their bullion reserves to work. Gold slipped to session lows on Wednesday, pressured as European Commission documents showed Cyprus plans to sell 400 million euros' worth of reserves to finance part of its bailout .
The sale plan, set out in a draft assessment of Cypriot financing needs prepared by the European Commission, would be the first major gold disposal by a euro area central bank since France sold 17.4 tonnes of gold in the first half of 2009.
At current prices, 400 million euros' worth of gold amounts to 10.36 tonnes of metal. Cyprus' total bullion reserves stood at 13.9 tonnes at end-February, according to data from the World Gold Council.
Portugal holds 382.5 tonnes of gold, worth some 14.76 billion euros at current prices, in its reserves, while Spain's holdings stand at 281.6 tonnes, worth 10.8 billion. Italy is the world's fourth largest gold holder, with 2,451.8 tonnes of gold in its reserves, worth 94.6 billion euros.
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