Germany May Want PIIGS Gold as Security for ‘Bailouts’ – Merkel’s Officials in Damage Limitation Mode

Tyler Durden's picture

From GoldCore

Germany May Want PIIGS Gold as Security for ‘Bailouts’ – Merkel’s Officials in Damage Limitation Mode

All major currencies are lower against gold today with the Japanese downgrade and concerns about global growth taking their toll on Asian stock markets. While European indices have eked out gains, some selling of peripheral European debt has been seen again and yields on German bunds have risen.


Cross Currency Table

Gold is trading at USD 1,844.80, EUR 1,276.10, GBP 1,117.90, CHF 1,456.50 and JPY 141,225 per ounce.

Gold’s London AM fix this morning was USD 1,850.00, EUR 1,279.30, and GBP 1,119.58 per ounce (from yesterday’s USD 1,886.50, EUR 1,301.75, GBP 1,138.64 per ounce).

The long expected correction in gold began yesterday and gold fell 1.6% in dollar terms. Traders taking profits after the recent price surge led to the falls yesterday. 

In trading terms, gold’s recent price appreciation of nearly 17% in one month had been excessive - although completely understandable given the scale of the crisis facing the global financial and economic system.

Another very significant development for the gold market took place yesterday when an influential member of Germany’s ruling coalition, Ursula von der Leyen, said that Germany should follow Finland’s lead on Greece and seek collateral for loans from bailout countries and the collateral should preferably be gold. 

Ursula von der Leyen is a senior German minister; deputy chairwoman of the Christian Democrats (CDU) and is a potential rival to Angela Merkel. It is unlikely that she would have made a solo run on this if she had not had a prior discussion with Merkel or at the very least with her government colleagues and lawmakers.

Government officials and anonymous government sources were quick to distance the chancellor and her government from Ms von der Leyen’s demands but Merkel herself did not comment and did not reject the call.

CDU finance spokesman Michael Meister said the call for periphery nations to give their gold reserves as loan collateral was a distraction. “The most important thing is that central banks retain independent control of their own gold reserves,” he said.

However, German officials were in full damage limitation mode.  The maxim ‘never believe anything until it is officially denied’ may be appropriate.

Germany is likely to push for European gold reserves to be used as collateral. The Deputy Chairwoman of the Christian Democrats is an astute woman and politician and knew exactly what she was saying.

Indeed, she echoed other senior lawmakers who in May called for Portugal to consider selling their gold.

Two leading governing party members - Norbert Barthle, Germany’s governing coalition budget speaker and his counterpart Carsten Schneider from the Social Democrats, the biggest opposition party, urged Portugal to consider selling some of its gold reserves to ease its debt problems. They called for a review of Portugal’s request for financial aid to include gold and other potential asset sales.

The German people and lawmakers realize that the euro is being debased and lawmakers realize that gold may offer protection from the debasement of the euro but also from sovereign default and systemic contagion.

Some of the PIIGS (to use the unfortunate and unfair acronym) have very sizeable gold reserves – especially Italy which alone has some 2,452 tonnes of gold. Portugal has 421.6 tonnes, Spain 281.6 tonnes, Greece 111.7 tonnes and Ireland has just 6 tonnes.

The ‘German PIIGS gold collateral’ story is a very important one that is unlikely to go away. Indeed, it may be the story that helps educate those not familiar with economic and monetary history and with monetary economics and who do not understand gold and why gold remains valuable and remains a safe haven asset and currency today.

Misguided ‘Gold Bubble’ Callers Out in Force Once Again
Gold remains overbought in trading terms and due a correction but the continuing simplistic talk that gold is a bubble is again misguided. It is a simplistic call based on assumptions and not based on the fundamentals of the gold market.

Some of the people calling gold a bubble today have been saying gold was a bubble when it reached $850/oz in early in 2008.

There remains a massive lack of understanding of what is happening in the gold market and very significant developments in the gold market are ignored due to a lack of knowledge and in some cases due to bias and ignorance.

The fact is that those who claimed gold was a “barbaric relic” and a “useless commodity” have gotten gold spectacularly wrong. 

This is because gold is not just a commodity. It is much more than that – it is money. Money that cannot be created at a whim and debased by politicians, bankers and central bankers.

It is also a safe haven asset and safe haven currency that has no counter party risk as it cannot default.

This is why gold is in demand today by astute people, governments and central banks. 

This is why central banks internationally were net buyers of gold in 2010, and will be in 2011and 2012, and almost certainly throughout this decade.

This is why the People’s Bank of China is building their gold reserves without declaring it to the world and is encouraging their citizens to buy gold.

This is why overnight Kazakhstan has given its central bank a ‘priority right’ to purchase all domestically mined gold "in full".

This is why Chavez has nationalized the Venezuelan gold industry and is repatriating Venezuela’s gold reserves.

This is why Bild, the best selling daily newspaper in Germany urged their readers to buy gold two weeks ago.

This is why senior German government officials are calling for the gold reserves of European countries such as Greece, Portugal, Spain, Italy and Ireland to be used as collateral for future loans.

Importantly, gold is a store of value unlike other assets, and unlike fiat currencies such as the US dollar, pound and the euro. 

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

SILVER 
Silver is trading at $41.89/oz, €29.02/oz and £25.46/oz. 

PLATINUM GROUP METALS 
Platinum is trading at $1,863.50/oz, palladium at $761/oz and rhodium at $1,800/oz

NEWS
 

(Bloomberg)
Merkel Rejects Seeking Collateral in Bailouts

(The Irish Times)
Derek Scally: Merkel rejects ally's call to use gold as bailout loan collateral

(Bloomberg)
Central Banks Seen Retaining Gold to Help Manage Debt as Bullion Advances

(Bloomberg)
Gold Rallies After Dropping From Record

(Bloomberg via Financial Post)
Repatriation of gold from abroad to start soon, Venezuela says

(Bloomberg)
Kazakhstan Gives Central Bank ‘Priority Right’ to Buy Gold

(Reuters)
Gold rebounds on Japan downgrade, physical buying

COMMENTARY

(MarketWatch)
Gold $3,000?

(MarketWatch)
China's Gilded Gold Market

(Wall Street Journal) -- Checking In On that ‘Gold to $10,000? Call

http://blogs.wsj.com/marketbeat/2011/08/23/checking-in-on-that-gold-to-1...

(The Telegraph) -- Relax, Central Banks Can Still Save Us

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/871442...

(ZeroHedge) -- A (Hopefully Fake) Paul Krugman Laments The Lack Of Death And Destruction Following Today's Earthquake

http://www.zerohedge.com/news/hopefully-fake-paul-krugman-laments-lack-d...

(ZeroHedge) -- Doug Casey: Exiting The Eye Of The Storm

http://www.zerohedge.com/news/guest-post-exiting-eye-storm

(Economic Policy Journal) -- Roubini's Off the Wall History of Financial Crashes

http://www.economicpolicyjournal.com/2011/08/roubinis-off-wall-history-o...

(Barron’s) -- Parabolic price action in gold suggests short-term caution while long-term bull market continues

http://online.barrons.com/article/SB500014240527023035451045765246629409...

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oogs66's picture

Greece should default first, then use the gold to get new loans....PIMCO probably sitting on a lot of cash they could loan to Greece under the right terms - big coupon and fully secured by gold.

 

slaughterer's picture

Wir wollen das Gold.  Sie können die Reste haben. 

orca's picture

The government knows something she doesn't:
German government spokesman says calls for Gold collateral can get very complicated
And I know what it is, if you promise not to tell anyone: the shit is not there. It is leased out, sold, stolen, evaporated or eaten by mice, whatever, it is NOT there.

Badabing's picture

Orca

 

“German government spokesman says calls for Gold collateral can get very complicated”

No shit, for every lease another 100 to 1 scenario maybe 10X what is believed

orca's picture

You have no idea how complicated it is to transport those bars from vault A to vault B. Super duper gigantically complicated. Has not been done before in the history of mankind.

Confused's picture

Your statement HAS to be wrong. If not, how did all the gold get into the Federal Reserve building in NY?

NidStyles's picture

There's gold there? You sure about that? Last I looked it was housed on a Military installation at taxpayer expense.

Absinthe Minded's picture

All I know is I got mine in house,fuck the idiots not smart enough to see the writing on the wall. If you're smart you'll take this little fire sale as your opportunity to get in.

Smiddywesson's picture

The gold is too there at the NY Fed, I saw it in a Bruce Willis movie.

molecool's picture

Of course you realize this could crash the gold market.

eureka's picture

Is the 4,000 metric tons of European gold - deposited at the NY FED -  still there?

Let's guess now - would Wall Street refrain from leases and leverage? Hmm.

Would U.S. imperial elite?

Confused's picture

There is certainly gold there. As for how much? Who knows.

 

You can go on a tour of the building. Which is worth doing.

Smiddywesson's picture

TPTB have had at least three years to replace any "misallocated" gold.  It's been two years since they knew for certain that the economy was not going to revive.  Does anyone think they would sit idly by and let themselves be destroyed.  They are buying for a reason you know, and that reason isn't to be caught red handed and thrown out of power.

Idiocracy's picture

Was there any gold in the basement levels of the twin towers prior to 9/11? I seem to recall something about first responders seeing gold around the base of the rubble.

knukles's picture

"the shit is not there"

That's why it gets complicated.
Although, it'd be no different than anything else in the EU with respect to the Euro.
The budget disciplines, %debt/GDP, telling the truth/whatthefuckever.

So why not make taking no collateral for gold in the form of an empty-promissory note (LOL empty-promissory note....) a really unbelievable unfuckingly inordinately complex bundle of machinations so nobody finds out there's no gold.

Business as normal, all bullshite

reload's picture

"Complicated" just like when Germany says to the Fed "you have 2,500 tonnes of our gold, we want it back please" and the Fed says "well thats a bit COMPLICATED because we err lent it to some of our friends on wall street, and now is definately not a convenient time for them to give it back"

The `if you dont hold it, you dont own it` mantra is gaining momentum daily. In times (now) of systemic strain and growing mistrust the desire to hold physical (not the promise of physical) will be compelling for CB`s around the world.

As for transportation, it can be done and insurance can be bought.

 

rsi1's picture

that gold could be useful if it wasnt because it is less than 5% of the value of those countries debts if they managed to even sell all of it at the currently peaking prices of $1850/ounce. What a great solution, for most of the PIGS you dont even cover one year of deficits, yes, makes total sense to sell it in a stupidity contest perhaps?

colalteral is good idea though.

Jim in MN's picture

Gold or industrial assets are acceptable.  Land and ancient monuments/tourist attractions, negotiable but at a steep discount.

molecool's picture

I'd accept their hot bitches.

Long-John-Silver's picture

Hot Bitchez degrade in value rapidly due to ageing. Gold never degrades and you can use it to buy fresh new Hot Bitchez.

Smiddywesson's picture

that gold could be useful if it wasnt because it is less than 5% of the value of those countries debts if they managed to even sell all of it at the currently peaking prices of $1850/ounce.

That's the end game, amass as much gold as possible and ramp prices as high as you need to dig yourself out.  That's what central banks are doing, and that's why they can't hold gold down.  They can drive down price after quick advances like we have had over the last 7 weeks, but they can't force it under the trend line over the last ten years.

 

Jim in MN's picture

All your debases are belong to us!  Raus!

eureka's picture

Most likely U.S. has been secretly sucking every sovereign's gold, Why else would Uber-Satan Greenspan lately chirp about returning to a gold standard?

U.S. empire is still the Uber-Satan of the world. Own it.

Azannoth's picture

"Ireland has just 6 tonnes"

In Irealnd there is a Bookie on every street corner(and no I am not exaggerating), and I have seen 0 gold coins shops(just a few jewelers), their culture is of total ignorance and stupidity

Badabing's picture

All the leprechauns have the gold .   

Dugald's picture

Dat's roight to be sure.....All the gold in Ireland is in a crock at the end of a rainbow!!

Herman Strandschnecke's picture

That may be so but I bet they felt the virginian earthquake in Dublin five hours before you did.

Smiddywesson's picture

The Irish hold no gold because the word's out they're switching to a Lucky Charms standard.

tmosley's picture

Look to the laws.  They may be prohibited.  Such was the case in the US from 1933-1973.

rsi1's picture

nah, its a free country, unlike others, its not ilegal. if it were ilegal, people would be more aware of it, and would have gold.

FunkyMonkeyBoy's picture

... and this is how you steal a countries real wealth with money 'printed' out of fresh air.

The whole world will be bought with imaginary "Jew confetti"! As was the plan all along...

... the greatest scam in history.

tmosley's picture

Not particularly racist.  It is more of an insult to the currency than the the race or religion.

If you are going to attack someone for being racist, I would suggest you go spend some time in the Rothschield thread.  Huge number of people who I have never seen posting before came out of the woodwork to jabber on about how evil DA JOOZ are.

Internet Tough Guy's picture

Yes just say 'Rothschild' and the ZH claven swings into full cross-burning moral outrage. It's a reason comments here should be disregarded if not avoided. Apparently ZH is quite comfortable being the last bastion of such cockroaches.

Long-John-Silver's picture

You should google "Jew confetti" so you understand what an ignorant comment you just made.

Internet Tough Guy's picture

Because it's really a compliment, right penguin?

A conspiracy theory took root that the inflation was a Jewish plot to ruin Germany. The currency became known as "Judefetzen" (Jew- confetti), ..."

 

tamboo's picture

says the biggest palestinian murdering racist of all time.

only about 60 million christians slaughtered by them in russia alone.

dont forget ukraine and armenia too mr. play the race card.

Eustace Mullins: The Secret Holocaust (e-book) - Wide Eye Cinema

 

SMG's picture

Not Jews, Illuminati.   Blame the right people for true justice.

Smiddywesson's picture

Regardless of who bears the blame, you are dead on...the greatest scam in history.

The Fed and the ECB are not going down without a fight.

DonnieD's picture

Can't they post Spam as collateral?

DaBernank's picture

Cyprus should offer the northern 1/3 of their island as collateral to Germany.

SwingForce's picture

Are you perhaps in the gold business?

MonkeySmoke's picture

How can a barbarous relic, religion, non-money item be used as collateral? Why would anyone, especially a country want "gold"?

/sarc on

FunkyOldGeezer's picture

1) where are those Gold reserves actually vaulted?

2) IF the Eurozone actually has more than the USA, AND it is mostly in European vaults, where does that leave the Euro/Dollar WTSHTF. Euro more attractive as a  run-to currency, or the new Global?

I'm just asking.

eureka's picture

Per Jim Rickards you are correct. Italy has far more gold per capita than U.S..

williambanzai7's picture

Ireland has 10,000 gallons of whiskey

Snidley Whipsnae's picture

...and, whiskey aint paper!

Irish Whiskey... real collateral and almost the equal of gold!

Bartanist's picture

Requiring gold as a collateral against a fiat loan?

So, Germany and the EU/ECB would be trading a journal entry for a physical asset. That hardly seems fair. People around the world have to get over the misunderstanding that bank journal entries have real value and are on parr as a tradeable asset for REAL physical assets and labor.

The so called PIIGS would be much better off creating their own fiat journal entries and telling Germany to go pound sand.