So a total collapse of the Cypriot Banking system was avoided with the cost so far being to loss of the Island’s second Bank, draconian Capital Control, the loss of its name as a “safe haven” for Russian capital and an economy being strangled for lack of liquidity and set on a deeply recessionary path. But small depositors are untouched but over €100,000 depositors have had all their money frozen with the prospect of losing 40% of it. This is not as clear a picture as we expect will become apparent later this week. Banks are closed until further notice.

We are waiting to see if there are any ‘ripple effects’ in Spain or Italy or the Eurozone as a whole. All the E.U.’s efforts will now be focused on stopping them, just as Spain is to report that they are not getting their deficit down to target levels, as the recession keeps reducing GDP and consequently debt-to-GDP ratios. It’s a ‘Catch-22’ situation as austerity causes more contraction and more contraction causes more austerity. Does the Eurozone inspire more confidence than just the “I will survive” level of confidence? It is this decline in confidence that is positive for global investors continued favouring of gold.

What is unavoidable is the inevitable consequence of the Cyprus crisis is that while it is tiny as a percentage of the E.U., the depositors in other debt distressed nations such as Spain, Italy and perhaps France will be easily ‘spooked’ should a ‘bail-in or bailout’ be requested by those nations. This adds an unwanted ‘fragility’ to the E.U. Sovereign debt crisis that the current structures are too insensitive to handle should bank runs come to pass.

Gold has not really reacted to the Cyprus crisis during its development, but on Asian and central bank demand.

Meanwhile, silver is back on the defensive today as the gold price slipped back from Friday’s levels. Cyprus is not a factor in the gold and silver prices, at the moment.