Cyprus Denies Plan To Sell Gold To Cover Debts

The Central Bank of Cyprus has denied a rumor that it will sell $525 million of its gold reserves to settle some of its debts.

The rumor began on Wednesday when several media outlets published a story claiming that the country was told by its European partners that it would have to sell gold and assets totaling $2.4 billion to overcome its debt problem.

The country’s debt will be 109 percent of its GDP in 2013 and will peak at 126.3 percent in 2015, according to a draft of the European Commission’s assessment of Cyprus from April 9.

The European Central Bank also carried out projections about Cyprus that show the country’s debt outlook is very challenging. However, the country’s debt will “remain on a sustainable path, provided that there is strong implementation of the adjustment program.”

Cyprus became the fifth euro-area member to receive an international bailout after the island’s banks closed on the verge of collapse.

While the EC’s assessment stated that Cyprus had committed to sell its excess gold reserves, Aliki Stylianou, a spokesperson at the country’s central bank, denied the sentiment. Stylianou explained:

“The decision to sell the gold is a decision to be taken by the board of the Central Bank of Cyprus (CBC). No such thing has been discussed or is in the process of being discussed. There are so many rumors flying about and this is just one of them.”

The apparent rumor that Cyprus would sell gold to cover its debts put pressure on bullion prices on Wednesday. Gold dropped 1.65 percent lower than it started at $1,558 per ounce. If the rumor would have come true, it would be the largest gold sale in Europe since 2009.

It is not clear yet if the Cyprus gold sale will happen or if the rumor (and with it the document published by the European Commission) is completely false.

[Image via Szaaman]