Gold Tops $1,600 on Cyprus Confiscation Concerns

Wall St. Cheat Sheet

On Monday, gold (NYSEARCA:GLD) futures for April delivery, the most active contract, increased $12.00 to close at $1,604.60 per ounce, while silver (NYSEARCA:SLV) futures for May edged 2 cents higher to finish at $28.87. It was gold’s first close above $1,600 since February.

Both precious metals received support as the euro sank to 3-month lows. Over the weekend, it was made public that depositors in Cyprus will have between 6.75 percent and 9.9 percent of their savings confiscated to rescue the country’s banking system. The move is part of a 10 billion euro bailout plan from the International Monetary Fund and the euro zone. Bondholders were spared from the unprecedented move.

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Cyprus is the fifth country after Greece, Ireland, Portugal, and Spain to receive help from the euro zone, but it is the first time that depositors will take the hit. Crowds rushed to ATMs machines, which ran out of cash and displayed “error” messages. However, funds in each account have already been placed aside to cover the confiscation amounts. Cypriot banks were set to open on Tuesday after a holiday weekend, but are now scheduled to open on Thursday. Reports also indicate that depositors with 100,000 euros or less may be protected, but confidence is already shattered.

By the end of the trading day, the SPDR Gold Trust (NYSEARCA:GLD) gained 0.90 percent, while the iShares Silver Trust (NYSEARCA:SLV) increased 0.54 percent. Gold miners (NYSEARCA:GDX) such as Barrick Gold (NYSE:ABX) and Newmont Mining (NYSE:NEM) both closed about 1.0 percent higher. Silver miner First Majestic Silver (NYSE:AG) jumped 2.08 percent.

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Disclosure: Long EXK, AG, HL, PHYS