Silver Market Update – Week Ending March 2013

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Cyprus Banks Reopen With Armed British Guards and Cypriot Police But No Riots Occur – The New Reality of “Bail In’s” in the EU Makes Silver and Gold Must Have Assets – New Swiss Gold Initiative Confirms that Central Banks Will Continue to Buy Precious Metals – World Waits for Japanese to Begin New Asset Purchases as Money Printing Continues – Italy’s Political/Economic Troubles Threaten the World Markets and Silver Takes Notice.

Silver Market Update - Week Ending March 2013Silver had offered several weeks of stability and calm amid the world economic and geopolitical storm, but this past week was not its best performance lately. The white metal opened at $28.84, closed at $28.30, and dropped 1.9% for the spot market week that ended Good Friday, March 29th.

While the fundamental news remains wildly supportive of silver and gold, the precious metals continue to trade off technical levels and remain range bound. Silver gyrated within a dollar per ounce range this week of Easter as Cyprus’ banks finally reopened.

Investors and depositors of the world learned the meaning of the new concept of “bail in’s”. A new Swiss gold initiative demonstrating that safe haven buying by central banks is still in fashion. The world waited anxiously for the Japanese to begin massive new asset purchases with freshly printed Yen, and Italy’s political gridlock continued to threaten the world economy at large.

Cyprus Banks Reopen With Armed British Guards and Cypriot Police

After the wild week in bailout nation Cyprus that was littered with the political wreckage demonstrated between Nicosia, Cyprus and Brussels, the EU, markets were nervously watching to see how things might play out when Cyprus re-opened its banks.

Analysts had feared carnage and blood in the streets as bank branches manned their entrances with not only Cypriot police, but also armed British security guards. While world media descended on the central square in sunny, cafe lined Nicosia and expected violent Greek styled protests, what actually transpired was surprising and anti-climactic.

Instead of “runs on the banks,” what you saw were a few dozen people standing patiently in lines, waiting for their turn to withdraw their money. What’s more, an actual “run on the banks” never occurred. While it is may be a little premature to call the all’s clear signal for Cyprus, silver was disappointed with the apparently calm resolution to what promised at one point to set off a domino effect event that could have potentially overthrown the banking systems of fellow EU behemoths Spain and Italy.

New Reality of “Bail In’s” in the EU Makes Silver and Gold Must Have Assets

The case is far from closed on the far ranging repercussions of what just went down in Cyprus though. The new reality on the ground is that the IMF, EU, and European Central Bank have now sanctioned, and even given their blessing, to countries nationalizing deposits in excess of 100,000 Euros from banks in order to help contribute to bail outs of financially troubled nations.

The EU calls these so-called “contributions” (that amount to looting the bank accounts of ordinary, hard working people) “Bail In’s. Since Jeroen Dijsselbloem, the Dutch Finance Minister, let slip that the EU is considering this as part of the new solution to sovereign debt crises going forward, you can be sure that the “bail in’s” will return to haunt troubled depositors in other countries in the near future.

Dennis Gartman, famed author of the Gartman Letter, put it best when he alluded to the chills that Europeans should all be feeling now as they come to grips with the fact that their Euros are now very seriously at risk and the banking system in the cultured continent is under attack by governments and intergovernmental agencies who are desperate for creative financial solutions.

There is even a draft law under consideration in the EU Parliament that would make these bail in’s completely legitimate in a banking crisis or emergency. You should be asking yourself whether or not this frightening new feature is coming soon to a banking institution near you.

Silver may have been down prematurely on the relief over the Cyprus situation not blowing up, but longer term, the white metal can only go up as these banking seizures become more commonplace. You can bet your bottom Euro that they will.

New Swiss Gold Initiative Confirms that Central Banks Will Continue to Buy Precious Metals

An analyst Joni Teves at UBS reported this past week that there is a new gold initiative that the Swiss People’s Party has formally launched in the safe haven stalwart of Switzerland. If citizens do go ahead and vote this resolution into law, then the revered Swiss National Bank will be required to keep a minimum of 20% of all its considerable assets in gold bullion.

At present, the Swiss keep slightly more than 10% of their assets in gold reserves. They would have make purchases of a full 1,000 metric tons to increase the ratio to 20%.

World Waits for Japanese to Begin New Asset Purchases as Money Printing Continues

While the Japanese government and its central bank have been talking about asset purchases, they have yet to carry them out in practice. In fact, the world markets expected them to take place beginning in 2014.

This week, Reuters released a bullish bulletin that the BOJ will begin immediately to purchase assets with no end date to be announced. They may also begin buying longer dated bonds when they meet to review their interest rates this coming week. Both of these actions are bullish for silver and gold, and may be reflected in silver price movements this first week of April.

Italy’s Political/Economic Troubles Threaten the World Markets and Silver Takes Notice

Italy has been under the radar for a while now since they held their recent election. The reality that things are not well in Italy began to settle in after the voting as investors realized that Italy will be a long time getting its act together well enough politically to form a stable government.

Italian borrowing costs jumped to a five month high when the market comprehended that the political drama in Italy will go on indefinitely. This is both bearish and bullish for silver, as Italy is among the G-8 economies and a prolonged crisis here is bad for economic growth prospects, which hurts the industrial use side of silver. At the same time, the uncertainty that surrounds the whole political mess in Italy gives rise to the safe haven bid side of silver.

Take Away on Silver Markets

The key theme to remember for silver prospects can be summed up in an interview that legendary currency and commodities investor Jim Rogers gave on CNBC this past week. When Rogers was asked what he thought about the state of the investment world, he opined that if you are an investor, then you should run for the hills because of the terrible Cyprus bank accounts raids that the IMF and EU mercilessly carried out.

He further warned everyone who thinks that they have a simple bank account anywhere in the world to take note. Silver markets are watching, and in due time, they will certainly take note of the continuous banking instability, “bail in’s,” Swiss Central Bank activities, and Japanese money printing. It is only a matter of time now.

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