Zero Hedge 
April 12, 2013
Update, and sure enough:
- PANICOS DEMETRIADES SAYS CYPRUS CENTRAL BANK INDEPENDENCE UNDER ATTACK,
- DEMETRIADES SAYS GOVT WANTS TO SELL GOLD WITHOUT CONSULTATION.
- CYPRUS CENTRAL BANK GOV DEMETRIADES SAYS HE AND HIS FAMILY RECEIVED DEATH THREATS
As a reminder, Panicos holds the now obsolete position of head of the Cyprus Central Bank.
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As was noted two days ago  (so certainly not the news catalyst for today’s gold sell off as some are trying to make it appear) as part of its bailout expansion by 35%, Cyprus announced, then refuted , then re-admitted, it would need to fund a portion of the incremental €7 billion in cash demands by selling €400 million, or nearly all 13.9 tons, of its central bank gold. Today, we learn that this demand came from none other than the head of the ECB Mario Draghi. Bloomberg reports: “European Central Bank President Mario Draghi said the profits of any gold sales by the Cypriot central bank must be used to cover losses it may sustain from emergency loans to Cypriot commercial banks.”
Of course, to make it seem that the Cyprus central bank is “independent”, the “European creditors today left a possible gold sale in the hands of the Cypriot central bank, which manages 13.9 metric tons of the metal, according to the World Gold Council.” Naturally, it would not be very politically correct to give the impression that it is none other than the collateral and asset-starved European central bank that is effectively running local monetary policy of its member states, and certainly would not make Cypriots, already devoid of their uninsured bank deposits, happy that the next demand by the ECB for the privilege of staying in the EUR is for them to hand over the only real asset their country has.
More from Bloomberg :
“The decision is going to be taken by the central bank,” Draghi said after a meeting of euro-area finance officials in Dublin. “What’s important, however, is that what is being transferred to the government budget out of the profits made out of the sales of gold should cover first and foremost any potential loss that the central bank might have from its ELA.”
ELA stands for Emergency Liquidity Assistance, a lifeline that can be offered by national central banks in the euro region to commercial banks that can’t get funding.
Asked about a letter he wrote to Cyprus President Nicos Anastasiades, Draghi said the letter is “very, very clear.” He said the government must abide by the central bank’s handling of the gold stock, since it is independent from political control under European rules.
“The independence of central banks in the euro area is enshrined in the treaty,” Draghi said. “The ECB will look at developments in Cyprus from this angle.”
Speaking alongside Draghi, Dutch Finance Minister Jeroen Dijsselbloem said selling gold “has always been an option put forward by the Cypriot authorities.”
“But as mentioned in the program documentation, this is a decision to be made independently by the Cypriot central bank,” he said. “And it’s not any demand from the troika or the eurogroup.”
In other words, central banks are independent, except for when the ECB tells them to sell gold to cover losses for loans made by collateralizing already worthless assets, or simply created out of thin air and backed by the full faith and credit of the Euro.
Naturally, for every seller of gold, there is a buyer. The only question now is whether Cyprus’ gold will end up in the willing hands of China, Russia or the very ECB telling it to sell the gold, and at very depressed prices at that.
Finally recall that the Fed and BOJ are now injecting about $160 billion in newly created money in the G-7 market every month, and there is no end in sight to said monetarily dilution, a number which is set to rise to at least €200 billion once the BOE joins the fray this summer once Mark Carney finally arrives.
In this context, one wonders: should one side with those who are selling their gold, or those who are buying it, such as Goldman which advised its clients two days ago to sell their gold to Goldman’s willing traders…