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ECB Doesn’t Rule Out “PIIGS” Gold as Collateral for Gold Backed Eurobonds, Sends Gold Soaring

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From GoldCore

ECB Doesn’t Rule Out “PIIGS” Gold as Collateral for Gold Backed Eurobonds

Gold and the Swiss franc are higher today as risk aversion has returned with global stock markets falling on concerns the US employment figure later today will disappoint and confirm that the US economy continues to weaken.

Gold is trading at USD 1,853.50, EUR 1,300.10 , GBP 1,143.30, CHF 1,446.50 and JPY 142,320 per ounce.

Cross Currency Table

Gold’s London AM fix this morning was USD 1,854.00, EUR 1,301.23, GBP 1,143.81 per ounce. The gold fix was higher than yesterday’s in all currencies - USD 1,815.50, EUR 1,270.73, GBP 1,118.95 per ounce.

Today, the President of the ECB, Jean- Claude Trichet did not rule out a gold backed euro bond in an interview with ‘Il Sole 24 Ore’ published on the ECB’s website.

The comments were a response to former Italian Prime Minister Romano Prodi who proposed - in Italian national daily business newspaper ‘Il Sole 24 Ore’ last week - the creation of a euro bond backed by member states’ gold reserves.

Prodi was President of the European Commission from 1999 to 2004.

Trichet was asked about “the creation of a fund guaranteed by the gold reserves of countries that would issue bonds to buy back national debt and make new investments.”

Trichet did not answer the question directly but said “at this stage, we have the EFSF bonds, which are bonds with a European signature. The main message of the ECB Governing Council to governments is to implement rapidly, fully, comprehensively the decisions taken by the European heads of state and government on 21 July.”

Reuters reported today in an article entitled ‘Gold sales would not solve Europe’s debt troubles’ that “Europe’s most indebted nations are under heavy pressure from their richer neighbours to sort out their finances, but they are unlikely to mimic the impoverished gentlefolk of old by selling off the family silver — or in their case, gold – to do so.”

Reuters recount how senior German lawmakers and politicians have advocated so called ‘PIIGS’ nations sell their gold to fund “bailouts”.
Reuters says that the “demands ignore the fact that this gold is not the property of the PIIGS' governments to sell.”

"Foreign exchange reserves are held and managed by central banks, not by governments," said Natalie Dempster, director of government affairs at the World Gold Council. "Forex reserves are set aside for specific purposes - defence of currency, payment of external debt obligations and payment of imports."

"In the past you could have had incidences where governments might try to overstimulate their economies by running exceptionally loose monetary policy before an election," she said. "That is a reason why it is critical, in an advanced economy, that central banks are independent”, said Dempster.

With regard to Prodi’s proposal to create a euro bond backed by member states' gold reserves, Reuters said such proposals remain little explored according to analysts.

GFMS' Klapwijk said that "it has slightly surprised me that some of them haven't looked harder at some creative uses of gold in terms of gold-backed bonds, which might be a useful way of trying to lower the cost of borrowing."

"But again, they come up against the fact that the scale of the borrowing required is so large that there are probably other ways of trying to deal with the problem rather than using gold. That would probably be a drop in the bucket."

Separately the Central Bank of Ireland has said that it will not disclose whether the gold reserves of Ireland (a paltry 6 tonnes) have been swapped or loaned out or had any other receivable status recorded against them (see Commentary below).

A senior administrative officer for financial control at the Central Bank of Ireland responded to an inquiry regarding the custody and ownership of Ireland’s gold reserves: “The bank is not, however, in a position to provide further information, nor to outline its investment strategy in relation to the gold holdings.”

G10 Currencies and Gold – 1 Year Performance

Gold’s lack of counter party and debasement risk and its safe haven status is resulting in it being slowly remonetised in the global financial and monetary system.

Gold’s status as a finite monetary reserve makes it ideal collateral today especially with the risk of contagion in the Eurozone and wider global financial system. 

For the latest news and commentary on financial markets and gold please follow us on Twitter

(Reuters) -- Gold sales would not solve Europe's debt troubles

(Bloomberg) -- Gold Society in Hong Kong Says Trade Volume Doubled in August

(Reuters) -- Gold flat ahead of U.S. payrolls data

(Your Money Site) -- Citigroup Global: Gold to reign in bull camp, $2,500 by year end

(CNN) -- Gold wedding bands get dumped for tungsten

(CNBC) -- How the Gold Business Operates


(Financial Times) -- Phantom gold haunts GLD vault tour

(London Bullion Market Association) -- Adding Gold to Europe’s Liquidity Buffers

(London Bullion Market Association) -- The Real Price of Gold

(GATA) Cromwell must be laughing over Ireland's forfeited gold

(The Irish Times) – Rory Gillen: Gold is like Irish housing in 2003 - overpriced, rising and a risky bet

(The Irish Times) -- Prudent Financial Planners Advocate Importance of Having an Allocation to Gold

(The Telegraph) -- When debt levels turn cancerous

(Financial Times) -- Get used to world without ‘risk free’ rate


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Fri, 09/02/2011 - 07:36 | 1625496 scratch_and_sniff
scratch_and_sniff's picture

Seek and ye shall find!

Fri, 09/02/2011 - 07:36 | 1625497 bankrupt JPM bu...
bankrupt JPM buy silver's picture

CNBC told me gold was a 5000 year old relic and I should sell the bubble top to buy NFLX...?

Fri, 09/02/2011 - 07:39 | 1625504 duo
duo's picture

That was Robot Trader.

If you can sell physical gold 100 times over, then couldn't you say that Ireland has 600 tonnes?

Fri, 09/02/2011 - 08:36 | 1625664 smlbizman
smlbizman's picture

the point that seems to have been missed by most if not all comments this morn is the sentence that ...the piigs do not own there is managed by the central banks...and i would really assume the ole "possession is 9 tenths of the law" will rule the day..and as always, all of you "pedant" grammar nazis, with all due respect, can go fuck yourself now... 

Fri, 09/02/2011 - 07:40 | 1625508 EscapeKey
EscapeKey's picture

CNBC told me the DJIA would be trading at 22,000, if HFT machines were banned.

Fri, 09/02/2011 - 07:41 | 1625509 StychoKiller
StychoKiller's picture

NFLX is mighty tasty with ketchup, Gold -- not so much! :>D

Fri, 09/02/2011 - 07:44 | 1625518 Sudden Debt
Sudden Debt's picture

HAHAHAHAHA!! The ECB IS SO WRONG!!!! Gold isn't money! I bet Bernanke is laughing his pants off right now with those fools...


Fri, 09/02/2011 - 09:32 | 1626068 Crisismode
Crisismode's picture



Hey, if you had 8000 tons of gold valued on the books @ $42./oz, wouldn't you be laughing too?

Fri, 09/02/2011 - 07:36 | 1625498 DaBernank
DaBernank's picture

Collateral, bitchez.

Fri, 09/02/2011 - 07:57 | 1625551 unky
unky's picture

This is the way to centralize power. When the ECB and the Fed have it all (leave alone the peanuts physical Gold which retail investors are buying), a new currency such as the SDR partly backed by Gold might be introduced. Who knows what is the plan of the elite...

Fri, 09/02/2011 - 07:36 | 1625499 DefiantSurf
DefiantSurf's picture


Gold used as a collateral asset, how long before China demands our gold as collateral?



Fri, 09/02/2011 - 07:39 | 1625505 StychoKiller
StychoKiller's picture

Pretty, colored pieces of paper are just NOT enough fer some idjuts!  Whocouldaknowed?

Fri, 09/02/2011 - 07:41 | 1625510 DefiantSurf
DefiantSurf's picture

its all fun and games until somebody opens a vault....and there is nothing there.


Fri, 09/02/2011 - 07:48 | 1625526 Snidley Whipsnae
Snidley Whipsnae's picture

"its all fun and games until somebody opens a vault....and there is nothing there."

Oh, there will be something in there... Thousands of claims on each bar that used to be there. :)

Fri, 09/02/2011 - 07:52 | 1625539 DefiantSurf
DefiantSurf's picture

As my friends at Soc Gen would say "Touche"


Fri, 09/02/2011 - 08:05 | 1625568 Snidley Whipsnae
Snidley Whipsnae's picture

Sort of like when Bush opened the Social Security box and showed people watching on tv that it only contained paper instruments, not FRNs or Ts... Some sort of 'special' bonds... Although I wonder what is so special about another type of paper.

The only thing I appreciated about Bush... When it was 'just another god damned piece of paper'... he called it exactly that.

Fri, 09/02/2011 - 07:55 | 1625544 Sudden Debt
Sudden Debt's picture

must be the polishing department that has moved them. Please come back in a month, and probably the gold will be back...




Fri, 09/02/2011 - 09:08 | 1625903 Arthor Bearing
Arthor Bearing's picture

The Polish Department took my gold?


Fri, 09/02/2011 - 07:56 | 1625540 Bicycle Repairman
Bicycle Repairman's picture

An audit of Ft. Knox may reveal that all the US has is "comedy gold".  Or as the BOE's Gordon Brown put it:  "Take my bullion.....please"

Fri, 09/02/2011 - 07:37 | 1625502 entendance
entendance's picture

Italy slackened budget efforts due to ECB -IFO's Sinn
"It was definitely wrong. It's not up to the ECB to buy Italian bonds," he said.


Fri, 09/02/2011 - 07:38 | 1625503 bania
bania's picture

Traditional Solution.

Fri, 09/02/2011 - 07:40 | 1625506 chaartist
chaartist's picture

Ireland =  leased everything out to asian people who are able to eat their gold too 

Fri, 09/02/2011 - 07:42 | 1625514 StychoKiller
StychoKiller's picture

After all, gold is NOT "wolf's heart, dog's lungs!" (i.e., inedible/worthless!)

Fri, 09/02/2011 - 07:40 | 1625507 CClarity
CClarity's picture

Gold as hedge on debt, not just inflation.

Debt/borrowing trades future consumption for present consumption, therefore in future borrower must consume less than what is produced.  If done rationally it works out.  Debt saturation nearly worldwide has been an exuberance that dramatically darkens the future.  Gold will hold a store of value when fiat disintegrates. 

Fri, 09/02/2011 - 07:42 | 1625513 DefiantSurf
DefiantSurf's picture


I just buy it because its shiny and pretty...


Fri, 09/02/2011 - 07:45 | 1625520 Sudden Debt
Sudden Debt's picture

I buy coins for the pictures on it, and if I clean em real good I can see myself.


Fri, 09/02/2011 - 08:25 | 1625615 GoldBricker
GoldBricker's picture

I like how heavy they feel for their size.

Fri, 09/02/2011 - 07:55 | 1625545 Snidley Whipsnae
Snidley Whipsnae's picture

Gold = Labor and Industry completed in the past, ergo, no counterparty risk

Paper Gold (an oxymoron) = A claim on labor and industry completed in the past, that may or may not be collectable due to counter party risk.

Fri, 09/02/2011 - 08:01 | 1625560 CClarity
CClarity's picture

Paper Gold = fiat unless you inspect the vault, have a key, and a pound of flesh legal contract.

Fri, 09/02/2011 - 08:08 | 1625578 Snidley Whipsnae
Snidley Whipsnae's picture

Excellent, I'll buy that definition!

I would add 'the ONLY key'... :)

Fri, 09/02/2011 - 09:19 | 1625988 CClarity
CClarity's picture

Only key is bestQ

Fri, 09/02/2011 - 07:43 | 1625515 Troy Ounce
Troy Ounce's picture



Quick, call Roubini!

Fri, 09/02/2011 - 07:45 | 1625516 Construct
Construct's picture

Eating gold is a tradition?

Fri, 09/02/2011 - 07:46 | 1625522 DefiantSurf
DefiantSurf's picture

"I will gladly pay you on Tuesday for gold I can eat today"

Fri, 09/02/2011 - 07:47 | 1625524 1835jackson
1835jackson's picture

Today will be interesting indeed. How many banks will be told..."you got served"

Fri, 09/02/2011 - 07:52 | 1625525 Sudden Debt
Sudden Debt's picture

The ECB better call for a priest because I don't think Europe has much time left.

Something between 1 week and 1 month.


Fri, 09/02/2011 - 07:48 | 1625527 WoodMizer
WoodMizer's picture

Is the CME price fron yahoo misleading or what?

At Yahoo financial they say gold fell $200 or 12.22%.

WTF is the comex gonna burn today?

Fri, 09/02/2011 - 07:57 | 1625549 Snidley Whipsnae
Snidley Whipsnae's picture

Current gold price $1861.60  7;55am

Fri, 09/02/2011 - 08:12 | 1625586 WoodMizer
WoodMizer's picture

Why is the comex price $250?  I am aware of the real spot price; I was just wondering what's upwith the comex.

Fri, 09/02/2011 - 08:14 | 1625591 Snidley Whipsnae
Snidley Whipsnae's picture

I don't know but you need not start a panic or cause heart attacks on this site by posting that sort of shit...

Fri, 09/02/2011 - 07:51 | 1625531 Thunder_Downunder
Thunder_Downunder's picture

No way they would do this unilaterally....

Fri, 09/02/2011 - 07:51 | 1625534 chaartist
chaartist's picture

maybe the can roll the can one two weeks longer when they try to calm the robots and sheep that they really have any gold left. The same in US. FED representant told congress that there is no gold in FED, they have only certificates and they have them very long time. So German gold is safe..NO Audit for 100 years, nobody can imagine how many trillion dollars were one will ever know.

Fri, 09/02/2011 - 07:58 | 1625550 Construct
Construct's picture

That is no problem. Just collect 500 bricks and spray paint them with gold color then have CNBC show the gold on TV. They would not even have to spray paint tungsten which has gone up in price. Just take any cheap shit bricks.

Fri, 09/02/2011 - 07:58 | 1625553 oogs66
oogs66's picture

on top of it all, did anyone ask the rest of the PIIGS if they want to use their gold as collateral?

Fri, 09/02/2011 - 07:59 | 1625557 Bicycle Repairman
Bicycle Repairman's picture

Which vault holds the gold?  Is this some kind of 21st century version of 3 card monte?

Fri, 09/02/2011 - 08:00 | 1625559 mayhem_korner
mayhem_korner's picture

Just conspiracizing, here, but the CNBC peppering of the "gold standard" talk has me thinking...

What sovereign has the most gold within its borders: including in-vault and confiscate-able?  Are the misfit powers that be racing to some kind of (temporary) gold standard to even out the debt books and, if so, doesn't he who has the most gold hold the bully pulpit?

Just an early morning thought post last night's Wikileaks deep-dive...

Fri, 09/02/2011 - 08:12 | 1625587 Snidley Whipsnae
Snidley Whipsnae's picture

Gold in soverign possession? Much more secret than their nuclear capabilities.


Fri, 09/02/2011 - 08:16 | 1625594 mayhem_korner
mayhem_korner's picture

Snidley...was thinking more "within the borders" on the thought of "confiscation" being 90% of possession, which we know is 90% of the law. 

I was cleanin' the Remington and fondling some maples when the thought occurred to me that these two assets might be converging...

Fri, 09/02/2011 - 08:44 | 1625723 Snidley Whipsnae
Snidley Whipsnae's picture

MK... James Turk has spent years trying to unravel gold flows and soverign possession and has yet to come up with numbers that make any sense. So many paper claims distort the numbers and the paper is sometimes reported in same line item as physical. Then there is the soverign paranoia (for good reason) and extreme secrecy and disinformation.

For instance, recently Saudia Arabia announced that they had 'found ' ~348 tons of gold that 'they did not know they had'. Also, China accumulates large quantities of gold over years and then announces that they are transfering 1,000+ tons from their soverign wealth fund to their central bank.

I believe that China is in possession of a lot more gold than stated. Also, Turk estimates that Indian citizens are in possession of ~15 tons of gold, not counting what Indian gov has.

Jim Rickards thinks that the US will confiscate German gold held in the US if push comes to shove... I don't doubt this. Germany has about 6,000 tons in US vaults. US has about 8,000 tons more or less. Say 14,000 tons in US not counting what US citizens, and other institutions hold.

It's all by guess and by golly.

Weapons? When you need one nothing else will do! Also, food, coffee, tea, liquor, ammo, medical supplies, sturdy clothing, sturdy foot wear, fuel, generators, batteries, hey... the list is almost endless. Of course, stuff that one has too much of can be traded for what one needs. Lots to consider.


Fri, 09/02/2011 - 08:05 | 1625566 DefiantSurf
DefiantSurf's picture


7.1 earthquake on the Aleutian islands, tsunami warning in effect

Long king crab bellies

Short crab boat insurance



Fri, 09/02/2011 - 08:18 | 1625596 mayhem_korner
mayhem_korner's picture

What's this gonna do to season six of Deadliest Catch?

Fri, 09/02/2011 - 08:07 | 1625574 High Plains Drifter
High Plains Drifter's picture

my advice to the piigs is not do it...............keep your gold..........of course i know you don't have control over your financial system anymore than us, but let's play along just for grins....

Fri, 09/02/2011 - 08:28 | 1625619 GoldBricker
GoldBricker's picture

I'll bet that at least some of the PIIGS leased it out and took back paper that they could carry on their books, much like the US. If the PIIGS were willing to falsify everything else, then why not this detail?

GATA had something a few years back on Portugal doing something like this.

Fri, 09/02/2011 - 08:52 | 1625788 Snidley Whipsnae
Snidley Whipsnae's picture

GoldBricker... Jim Rickards was discussing the lease arrangements recently. He said that when Soverigns lease gold to bullion banks that the physical gold remains in the vaults of the soverigns.

So, if bullion banks have sold their leased paper gold forward it is incumbent upon them to settle with their counterparty and that it will probably be a fiat settlement. 

According to Rickards, the gold remains in the soverigns vaults.

You can find a link to the Rickards interview at King World News.

Fri, 09/02/2011 - 10:00 | 1626217 GoldBricker
GoldBricker's picture


Thanks for the tip. Far be it for me to contradict Rickards. My impression was always that the bullion banks actually borrowed the bullion, sold it into the market, and left an IOU with the central bank (which is why the US's 8K tons are un-audited. If the US gold hoard was merely pledged, presumably they could have auditors come count the bars (just don't let them see the lease book).

I just noticed this GATA piece from today:

saying that Ireland's (probably pathetic) gold hoard has been 'invested' by the government.

My thinking is that we're rapidly headed into the gold version of Irving Fisher's 'liquidity trap', where everyone holds on to the gold in his possession, no matter whom it's pledged to (in fact, especially if it's pledged to mulitple parties, as Rickards proposes).

I should add that something like this supposition figures into FOFOA's well-known $50K/ounce forecast.


Fri, 09/02/2011 - 08:18 | 1625598 dcb
dcb's picture

the "markets" are saying we don't want fiat, but of course the sheep will be stuck with it, it looks as if there wil be a a two currency world. one for the financial system based on gold, while the rest of us get stuick with the keynesian mess. the wealthy will have a true store of wealth, and we will have endless devalutaion and inflation. That's how I see it.

Fri, 09/02/2011 - 08:19 | 1625599 LoneCapitalist
LoneCapitalist's picture

I dont see any banks willingly putting up their gold to cover debt in the current system when everyone knows this system is going down. Why throw real money after fake? If theyre forced to put it up, this could be the begining of the unravelling.

Fri, 09/02/2011 - 08:27 | 1625618 Bicycle Repairman
Bicycle Repairman's picture

"If theyre forced to put it up, this could be the begining of the unravelling."

This is a turning point anyway.

Fri, 09/02/2011 - 08:29 | 1625621 Kokulakai
Kokulakai's picture

They can slap on gold lipstick, but the PIIGS are still barbecue. 

Fri, 09/02/2011 - 08:31 | 1625627 bentaxle
bentaxle's picture

HSBC to JPM, can we get our gold back we gave you last week, all of it?

Fri, 09/02/2011 - 08:31 | 1625631 sudzee
sudzee's picture

Gold lease rates should skyrocket from under .35 to 10%. Russia already offering 7%. Got gold?

Fri, 09/02/2011 - 08:41 | 1625707 Spigot
Spigot's picture

Hey, Irish people, you had better cash in your fiat denominated investments and buy as much physical gold as you can to protect yourselves. Its obvious that your gvernment doesn't have a clue.

Fri, 09/02/2011 - 08:47 | 1625745 Spigot
Spigot's picture

I like the idea of a gold backed bond, kind of removes the whole "rating agency" charade. And drives gold prices to match the level of top tier debt, a yummy prospect (pun intended).

Mon, 09/05/2011 - 08:48 | 1633821 shacai
shacai's picture

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