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

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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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Wed, 08/24/2011 - 08:23 | 1594469 oogs66
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.

 

Wed, 08/24/2011 - 08:47 | 1594545 slaughterer
slaughterer's picture

Wir wollen das Gold.  Sie können die Reste haben. 

Wed, 08/24/2011 - 08:26 | 1594474 orca
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.

Wed, 08/24/2011 - 08:35 | 1594502 Badabing
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

Wed, 08/24/2011 - 08:43 | 1594530 orca
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.

Wed, 08/24/2011 - 08:58 | 1594595 Confused
Confused's picture

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

Wed, 08/24/2011 - 09:04 | 1594626 NidStyles
NidStyles's picture

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

Wed, 08/24/2011 - 09:28 | 1594721 Absinthe Minded
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.

Wed, 08/24/2011 - 10:51 | 1595075 Smiddywesson
Smiddywesson's picture

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

Wed, 08/24/2011 - 08:45 | 1594536 molecool
molecool's picture

Of course you realize this could crash the gold market.

Wed, 08/24/2011 - 08:48 | 1594547 eureka
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?

Wed, 08/24/2011 - 08:59 | 1594602 Confused
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.

Wed, 08/24/2011 - 10:54 | 1595096 Smiddywesson
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.

Wed, 08/24/2011 - 09:49 | 1594782 Idiocracy
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.

Wed, 08/24/2011 - 08:58 | 1594598 knukles
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

Wed, 08/24/2011 - 10:05 | 1594841 reload
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.

 

Wed, 08/24/2011 - 08:27 | 1594476 rsi1
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.

Wed, 08/24/2011 - 08:36 | 1594504 Jim in MN
Jim in MN's picture

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

Wed, 08/24/2011 - 08:46 | 1594543 molecool
molecool's picture

I'd accept their hot bitches.

Wed, 08/24/2011 - 09:06 | 1594637 Long-John-Silver
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.

Wed, 08/24/2011 - 10:59 | 1595120 Smiddywesson
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.

 

Wed, 08/24/2011 - 08:28 | 1594477 Jim in MN
Jim in MN's picture

All your debases are belong to us!  Raus!

Wed, 08/24/2011 - 08:56 | 1594580 eureka
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.

Wed, 08/24/2011 - 08:28 | 1594478 Azannoth
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

Wed, 08/24/2011 - 08:38 | 1594516 Badabing
Badabing's picture

All the leprechauns have the gold .   

Wed, 08/24/2011 - 08:49 | 1594553 Dugald
Dugald's picture

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

Wed, 08/24/2011 - 09:21 | 1594686 Herman Strandsc...
Herman Strandschnecke's picture

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

Wed, 08/24/2011 - 11:21 | 1595207 Smiddywesson
Smiddywesson's picture

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

Wed, 08/24/2011 - 08:55 | 1594582 tmosley
tmosley's picture

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

Wed, 08/24/2011 - 09:00 | 1594607 rsi1
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.

Wed, 08/24/2011 - 08:30 | 1594483 FunkyMonkeyBoy
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.

Wed, 08/24/2011 - 08:44 | 1594531 Internet Tough Guy
Internet Tough Guy's picture

Self immolate already, racist.

Wed, 08/24/2011 - 09:00 | 1594606 tmosley
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.

Wed, 08/24/2011 - 09:10 | 1594655 Internet Tough Guy
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.

Wed, 08/24/2011 - 09:10 | 1594654 Long-John-Silver
Long-John-Silver's picture

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

Wed, 08/24/2011 - 09:13 | 1594664 Internet Tough Guy
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), ..."

 

Wed, 08/24/2011 - 14:29 | 1596060 tamboo
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

 

Wed, 08/24/2011 - 10:02 | 1594836 SMG
SMG's picture

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

Wed, 08/24/2011 - 11:23 | 1595217 Smiddywesson
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.

Wed, 08/24/2011 - 08:33 | 1594494 DonnieD
DonnieD's picture

Can't they post Spam as collateral?

Wed, 08/24/2011 - 08:34 | 1594497 DaBernank
DaBernank's picture

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

Wed, 08/24/2011 - 08:34 | 1594499 SwingForce
SwingForce's picture

Are you perhaps in the gold business?

Wed, 08/24/2011 - 08:35 | 1594501 MonkeySmoke
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

Wed, 08/24/2011 - 08:48 | 1594549 Dangertime
Dangertime's picture

May I suggest diamonds?

Wed, 08/24/2011 - 08:35 | 1594503 FunkyOldGeezer
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.

Wed, 08/24/2011 - 09:19 | 1594601 eureka
eureka's picture

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

Wed, 08/24/2011 - 08:36 | 1594507 williambanzai7
williambanzai7's picture

Ireland has 10,000 gallons of whiskey

Wed, 08/24/2011 - 08:41 | 1594519 Snidley Whipsnae
Snidley Whipsnae's picture

...and, whiskey aint paper!

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

Wed, 08/24/2011 - 08:42 | 1594524 Arrowhead
Arrowhead's picture

I am long Redbreast

Wed, 08/24/2011 - 08:37 | 1594510 Bartanist
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.

Wed, 08/24/2011 - 09:01 | 1594612 eureka
eureka's picture

Just like China would be much better off telling U.S..... - right?

Wed, 08/24/2011 - 09:05 | 1594632 NidStyles
NidStyles's picture

They already did, hence the downgrade in the Asian markets on US T-Bill's. Haven't you been paying attention here?

Wed, 08/24/2011 - 09:33 | 1594696 eureka
eureka's picture

They're still taking USD for the glass beads they sell to the U.S. natives, who still live only to consume.

Where has your attention been lately?

Wed, 08/24/2011 - 08:38 | 1594512 buzzsaw99
buzzsaw99's picture

Excuse me, but if the PIIGS have gold wtf do they need the euro for? Just start a sovereign gold backed currency and tell the bankers to get f$cked.

Wed, 08/24/2011 - 09:10 | 1594644 eureka
eureka's picture

When will U.S.'ians understand that the EU endgame is complete EU political union?

And that even the European masses, incl. piigs, want that - even of they don't all know it.

Financial, fiscal steps are mere primers. 

EU is the antidote to U.S. hegemony.

Wed, 08/24/2011 - 09:25 | 1594709 Vergeltung
Vergeltung's picture

you're bringing buckets of stupid this morning. nice work.

 

Wed, 08/24/2011 - 09:45 | 1594749 eureka
eureka's picture

Does that mean that A)you love U.S. hegemony and B) you think it will last much longer?

If so, the next two years will bring you lot's of big surprises.

Good luck with your hegemonial belief system. What a happy little Disneyland U.S. is.

And you do know that your beloved U.S. hegemony is possible only courtecy of Wall Street's leverage scams fucking everyone including the U.S. masses, Don't cha?

Since you must think Jim Rickards is stupid -  you are a troll. Up yours, "Vergeltung".

Wed, 08/24/2011 - 11:30 | 1595253 Smiddywesson
Smiddywesson's picture

I can't agree with eureka.  The actions of the Fed and the ECB are identical, kick the can no matter how harmful it is to their balance sheets in order to slowly buy cheap gold.  They wouldn't be cooperating unless they had common interests.  In light of China's behavior, I would say they intend to screw China, China knows it, and this game will continue until cheap gold is no longer available.

We are getting close to a gold standard.  They won't wait for everything to go to zero before they pull the plug.  This plumet in gold prices might be the tell before that announcement is made.  My personal opinion is it is not and it is just a correction being orchestrated by desperate central banks against a very overbought market.

Prognosis:  More kicking of the can ahead, and a swift rebound of gold prices as central bank co-conspirators, and rouge nations who cheat the conspiracy, buy gold.

Wed, 08/24/2011 - 08:38 | 1594514 Jim in MN
Jim in MN's picture

Have long thought of a video game where the pitchfork and chain gun wielding masses chase the global elites through the fun spots like Bali, Kathmandu and Ibiza, ending up at high levels of play in the Swiss underground empire, which goes dozens of levels and includes lots of gold, chocolate bars, Hitler's and JFK's brains, etc. etc.

How odd to think it might all come true.

Wed, 08/24/2011 - 08:49 | 1594555 slaughterer
slaughterer's picture

I think I would get addicted to that game.

Wed, 08/24/2011 - 08:38 | 1594515 Snidley Whipsnae
Snidley Whipsnae's picture

Gold as collateral??? But Ben said that gold isn't money... Following Ben's reasoning means that paper is as good as gold... Ben should tell the Germans that only paper should be used as collateral...

Anyone here buy that? lol

Wed, 08/24/2011 - 08:42 | 1594522 molecool
molecool's picture

Germans discovered how to eat it.

Wed, 08/24/2011 - 08:45 | 1594540 Snidley Whipsnae
Snidley Whipsnae's picture

Is encumbered gold more edible than unemcumbered gold?

Encumbered sounds edible... sort of like cucumber...

I doubt the Germans get an opportunity to eat the 1/2 of their gold that is stored in the US...

Wed, 08/24/2011 - 08:43 | 1594527 Life of Illusion
Life of Illusion's picture

 

 

When does FED demand gold as collateral for its printing?

Wed, 08/24/2011 - 08:41 | 1594520 molecool
molecool's picture

Euer Gold bitte, Ihr Schlampen!

Wed, 08/24/2011 - 08:43 | 1594528 monopoly
monopoly's picture

Gold is a "tradition", Ben told us so. That is all.

That's ok, I will keep buying tradition.

Wed, 08/24/2011 - 08:44 | 1594534 SweatpantKing
SweatpantKing's picture

Doesn't Germany realize: GOLD HAS NO INTRINSIC VALUE!!!  Expect Bernank to call her and tell her this very soon.

Wed, 08/24/2011 - 08:45 | 1594542 sudzee
sudzee's picture

Ve vil save you Greeks. Ve vil give you 500billion in fiat for yours 111 tons of gold. Vats such a deal. Ve tink 5billion a ton is good, yes. To make tings easy ve pay you in billion euro-furor notes, yes.

Wed, 08/24/2011 - 08:48 | 1594551 molecool
molecool's picture

Vee vill kick your ass first.

Wed, 08/24/2011 - 08:47 | 1594548 Gandalf6900
Gandalf6900's picture

I'd like to make a very elementary consideration so please don't make fun of me and help me understand.

Gold is a finite resource, not all of it having been extracted yet obviously, but finite indeed.

Following this assumption shouldn't gold have a stable value throught history, oscillating nonetheless but not spiking like it is doing now.

I can undrstand the value of gold would rise but only with regard to the currency you relate it to as the currency becomes more worthless.

So, why is the price of gold spiking, is it just following the laws of supply and damand or is it really a bubble.

Have mercy and good day.

Wed, 08/24/2011 - 09:03 | 1594621 tmosley
tmosley's picture

It's not the price of gold that is spiking so much as the price of fiat currencies tanking.  Viewed through the prism of the gold standard, what we have here is a deflationary depression, where people are running to cash.  This is a natural result of government interventions in every aspect of our economy.  It will get worse, and gold will get more valuable.  Similar with silver, but with some extra factors driving it up.

Wed, 08/24/2011 - 09:24 | 1594688 Jim in MN
Jim in MN's picture

See post below on soldiers' pay.  Put in the wrong place.  Personally I think the oil-gold ratio is the key as global players reprice against the devaluing dollar.  There are overshoots and undershoots and a lot of games involved but the amount of 'stuff' the oligarchs in the oil producing countries can buy with a barrel is in my view being mirrored by the gold price. 

If the US somehow got its fiscal and budget house in order it could have a strong negative effect on gold.  But now, our 'twin towers' of fiscal and trade deficit (almost entirely oil) are mutually reinforcing.  Thus we run the dollar down and oil up, which increases the trade deficit, etc. etc. etc. 

So every time you fill up at $3+ per gallon you are paying the oil producers for our excessive debt.  Priced in gold, not so much. 

The implication no one wants to talk about is that tax increases or budget cuts that were put on deficit reduction (not more spending) would tend to decrease gas prices, resulting in a 'rebate' that's distributed in a very progressive fashion (more to folks with lower incomes).  Actually very efficient.  But we can't talk about such things these days...in any party.

Wed, 08/24/2011 - 09:45 | 1594756 Boxed Merlot
Boxed Merlot's picture

Another way to look at it is the ratio of gold to silver. As money is viewed as a store of human activity, an ounce (easily carried) of silver is roughly equivalent to an hour of blue collar labor in a "developed" country, with an ounce of gold being a week.  The ratio can sometimes be seen as the community/society's value placed on labor and how much time a "work week" should be.  32-60 hours depending on the point of the economic cycle of construction / deconstruction / maintenance modes.  imho.

Wed, 08/24/2011 - 10:09 | 1594861 gwar5
gwar5's picture

Actually, the value of gold is stable. 100 pieces of gold would buy a decent house in 1880, and 100 pieces of gold will buy you a decent house today. It's the currencies that have slowly been debased for decades that account for the astounding difference. The debasement is being ramped up to wipe out sovereign debt, which will wipe out savers too.

 

TPTB don't want you to figure that out, they even made gold illegal to own at one time. Last couple of decades they've resorted to suppressing the price of gold. Gold is just playing catch up right now. But based on sovereign debts and the amount of money printing that has occurred, gold still has a long way to go.

What the other say is true.

 

 

Wed, 08/24/2011 - 08:50 | 1594559 molecool
molecool's picture

"Following this assumption shouldn't gold have a stable value throught history, oscillating nonetheless but not spiking like it is doing now."

Gold's purchasing power has been very stable over centuries - can't say that of any currency.

Wed, 08/24/2011 - 08:52 | 1594566 ljag
ljag's picture

Sorta off topic

 

Here in STL, a local coin shop/jewelry/pawn store has 'em standing in line outside. Only so many peeps allowed in at a time. Some selling of old bracelets but mostly buys of bars and coins. BTW, it was 99degrees yesterday.

Wed, 08/24/2011 - 09:14 | 1594667 quasimodo
quasimodo's picture

Um, sure.. I will believe all these coin shop madness stories if and when someone actually posts a legit pic.

Wed, 08/24/2011 - 08:55 | 1594581 Negro Primero
Negro Primero's picture

..courtesy of UBS

For GOLD, yesterday's sharp pull back is seen as a short-term correction. Our outlook remains bullish and we expect the metal to move higher towards 1913.50, yesterday's high, ahead of 1931.42, an extension level. The MACD line is above the signal line and the zero line to substantiate the bullish conditions. Initial support lies at 1821.90 ahead of 1780.45.

Outlook: BULLISH

-----------------------------------------------

SILVER witnessed a correction yesterday to open support at 40.55. A sequence of higher highs and higher lows formed off the May 12 low remains in place, which defines a bull trend. The metal has initial resistance at 44.25, yesterdays high, a clearance of this level would expose 45.58.  A break below 40.55 would expose 39.29.

Outlook: BULLISH

---------------------------------------------------------------------

PLATINUM prices fell sharply yesterday, however, as long as the support at 1825.28 holds, we maintain our bullish stand. Slope of the 100-day MA is also positive to substantiate the bull trend. We expect to see a move above 1916.75 to expose 1930.84, an extension level.  Initial support lies at 1840.25 ahead of 1825.28, a fibonacci level.

Outlook: BULLISH

------------------------------------------------------------------------

PALLADIUM has initial resistance at 782.50; a break above this level would trigger a short-term bull trend and pave the way for gains towards 798.50. The 100-day MA is almost flat indicating a sideways trend. On the downside, initial support lies at 742.75, a break below which would open the way towards 724.25.

Outlook: NEUTRAL

-----------------------------------------------------------------------------

Gold Correction

 Gold had a nasty pullback late yesterday, having hit new highs of $1912 but then traded with an undeniably heavy tone. After the record highs in Asia, Europeans took the opportunity to bank profits. Residual Asian selling featured, and with the bulk of trading taking place via electronic platforms, the market was very illiquid, leading gold to gap down in $10 moves to lows of $1871. The price drop didn't entice physical buyers however, perhaps because they were afraid of further downside. Gold found a home around $1880, before another jaunt to the downside following the New York open, when gold fell to a low of $1863. It then climbed back up to around $1880, but suffered a further selloff late in the afternoon; with equity markets in positive territory as investors looked for value and the gold market already heavy, comments from a German minister that Italy should sell its gold to service its debt burden fostered further liquidation. And despite a bounce on the news of an earthquake in the US, gold's party quickly fell apart in the aftermarket and the metal sank to $1823.

 

 Assessing gold today, market participants are likely to be confused. The pullback was hardly surprising given recent moves. A lot of the bullish enthusiasm had evaporated: early yesterday we saw clients buy puts, particularly at the very short end of the curve. But is this the correction to buy into? So far investors are treating it as such, with gold trading back up to highs of $1853 in Asia, helped by Moody's downgrade of Japan, but with a nervous bias. Gold has fallen back to $184at time of writing. The behaviour of other markets will likely  determine a lot for gold over the next 24-48 hours. A positive run in global equities could encourage another weighty retracement in gold, though investors are likely to be nervous about placing big positions ahead of Fed Chairman Bernanke's speech at Jackson Hole on Friday. So far physical demand today remains quiet, but volumes traded on the Shanghai Gold Exchange overnight were decent.

 

Gold could also topple more if ETF investors extend this week's liquidation trend. Yesterday, total gold holdings of the 15 ETFs that we track fell by 0.79 moz to 73.30 moz from the previous day, the largest single day fall since the end of January. Robust outflows worth 798.42 koz were seen from the GLD. That the liquidation trend is not solely a spec event but is also seeping into the more sticky ETF market is a worrying sign. However one day of heavy selling doesn't make a trend.

In the week to Aug 23: Gold ETF holdings declined by 0.09 moz to 73.30 moz from the previous day, after rising for the last three days on rolling weekly basis. On a daily basis holdings fell by 0.79 moz which is the largest fall since the end of January 2011. Investors liquidated their holdings in GLD fund by 107.06 koz, ETFS (LSE) trust gave back 55.36 koz, New gold (JSE) contract saw redemptions worth 35.15 koz, and Julius Baer contract was down by 21.00 koz. iShares contract on other hand added 70.27 koz. Month to date change in total gold ETF holdings currently stands at 1.31 moz. The rolling monthly change fell to 2.01 moz vs 2.25 moz previously.

 

 


 

 

Wed, 08/24/2011 - 08:57 | 1594591 youngman
youngman's picture

I think TPTB are calling the bluff..or bet on the PIIGS....see if they agree to it...if they do not...don´t pay..if they do ..they are in deep trouble...I hope it gets started...we need a gold standard to get out of this mess...

Wed, 08/24/2011 - 09:00 | 1594604 TIMMAYYY
TIMMAYYY's picture

hahaham dumb piigs being roasted by the germans....

im off to get a nice strong drink and get on with my life...

stupid stupid nwo...poisoning my family and friends....destroying countries...fucking up the world cause they can handel the fact they will all die one day...

 

fear of death with be the end of US...

Wed, 08/24/2011 - 09:01 | 1594616 buzzsaw99
buzzsaw99's picture

why would germany put faith in a "barbarous relic"?

Wed, 08/24/2011 - 09:04 | 1594628 alt-shift-x
alt-shift-x's picture

LOL "potential rival to Angela Merkel" no fucking way ... and by the way Merkel did comment that ""Ich rate, diesen Weg nicht weiter zu beschreiten" means " i recommend not to walk that way" in other words ... shut the fuck up Ursula

http://www.tagesschau.de/wirtschaft/notkredite106.html

on the other hand ‘never believe anything until it is officially denied’ is now appropriate.

Wed, 08/24/2011 - 09:04 | 1594629 alt-shift-x
alt-shift-x's picture

LOL "potential rival to Angela Merkel" no fucking way ... and by the way Merkel did comment that ""Ich rate, diesen Weg nicht weiter zu beschreiten" means " i recommend not to walk that way" in other words ... shut the fuck up Ursula

http://www.tagesschau.de/wirtschaft/notkredite106.html

on the other hand ‘never believe anything until it is officially denied’ is now appropriate.

Wed, 08/24/2011 - 09:06 | 1594636 sudzee
sudzee's picture

Gold backed soverign bonds. No this one ain't going to fly. The Bernank will giggle at that idea.

Wed, 08/24/2011 - 09:09 | 1594649 NidStyles
NidStyles's picture

Sound's like a scam to me. Here we will mark this many notes off this book if you give us a bunch of precious metal's in exchange. Nevermind that you will probably be indebting your nation to us until we annex your land and absolve your government.

 

Yeah, I think I would pass on that, and simply default my way out of the E.U.. It's not like they have actually gained anything from the E.U. other than endless servitude and debt.

Wed, 08/24/2011 - 09:11 | 1594658 spanish inquisition
spanish inquisition's picture

How hard can it be to transfer gold? +4000, -4000, Hit enter. "Looks everyone , see the paper, we transferred it!"

Wed, 08/24/2011 - 09:12 | 1594659 Jim in MN
Jim in MN's picture

http://dougsmith.ancients.info/worth.html

Let's compare soldiers' pay:

"This gold aureus of Marcus Aurelius was worth 25 silver denarii and would represent a month's pay to a legionary soldier."  At this time, about 170 AD the aureus had about 7 grams of gold content.  That's about a quarter ounce.  Call it $450.

Later, say 320 AD, as gold coins tended to float against other currency they still had similar value:

"...a solidus represented the pay for a month and a half."  These had about 4.5 grams or 1/6 oz. of gold.  So call it $300.  Note that the empire was on the way to collapse, largely related to currency debasement.

Today's soldier is paid $1,467 per month (E-1, new service member).  So, less than an ounce a month still pays the army.  Net of taxes, not so far off from Roman wages. 

Wed, 08/24/2011 - 09:13 | 1594663 aleph0
aleph0's picture

PIIGs : sure, you can have "future" Gold at 25,000$ .. but not at this price.

Alternative : we leave the Euro and introduce our own gold backed currency.

 

Wed, 08/24/2011 - 09:18 | 1594673 MFL8240
MFL8240's picture

In case the Germans did not notice, the PIGGS are holding all the cards.  If they default, they lose nothing and the German and French banks fold as well, the US derivative ponzi is finally exposed to the world.  If they give up their Gold, they are left with debt they cannot pay back.  If I was advising the PIIGS, I would tell them to tell Germany and France, FU Jack, no Gold, we fold. 

Wed, 08/24/2011 - 09:18 | 1594679 OuaisBla
OuaisBla's picture

What is scaring me, is that Canada is in the bottom of the list and doesn't hold lots of Gold. That is not correct and must be fix.

 

I'll recommend to my Prime Minister to consider an efficient way to acquire lots of gold: invade USA.

 

Canadian people, cause of the harsh winter, are in better shape than lazy southerners. Still the Boston Bruins won the Stanley Cup in face of the Vancouver Canucks. The Stanley Cups is in Silver so that is an artifact that is worth to get back up here too.

 

Wed, 08/24/2011 - 09:47 | 1594772 Absinthe Minded
Absinthe Minded's picture

Yes they did. Thanks for reminding me what a great winter that was. Next up, Red Sox and Patriots football. It may be just a mindless diversion for the masses but damn it's fun to watch. 

Wed, 08/24/2011 - 09:58 | 1594822 Bicycle Repairman
Bicycle Repairman's picture

"Canadian people, cause of the harsh winter, are in better shape than lazy southerners."

What country's national dish is doughnuts covered in poutine?

Wed, 08/24/2011 - 09:20 | 1594684 Temporalist
Temporalist's picture
Rickards Says Libya's Gold Bullion May Never Be Found

http://www.youtube.com/watch?v=a_LjXW9bvU0

 

Wed, 08/24/2011 - 09:21 | 1594691 iraskin
iraskin's picture

Isn't what it was from the beginning about? It was about the collateral piece from the beginning. Germans don't give up, they want Europe at any cost. I don't get these maniacs, they still get taxed at 90%, what do they need all this money for?

Wed, 08/24/2011 - 09:43 | 1594763 OuaisBla
OuaisBla's picture

German people learned from their previous mistakes. Their instability were the roots of the 1st and 2nd World Wars. They are protecting their economy to prevent to become the root of the next one. They are leaving the burden of the first strike to another player this time.

Wed, 08/24/2011 - 09:28 | 1594717 Pegasus Muse
Pegasus Muse's picture
22 August 2011 23:13

Behind the soaring gold price: Paul Walker, Thomson Reuters (formerly of GFMS)

 

Would Paul be looking to cash in some gains now?

ALEC HOGG: We are going to India now to link up with Paul Walker, the [former] chief executive of GFMS and our resident gold Guru. Today, Paul, Hugo Chavez of Venezuela gave the gold price a little bump upwards, getting close to that $1900/oz.

ALEC HOGG: Walking around India – well, the people that you are engaging with there, is the appetite as strong as ever?

PAUL WALKER:I've been in Delhi for the last week, and I've seen … people at slightly different levels of the bullion business here, all of them reporting very good business. But I didn’t visit that many jewellery outfits in Delhi.

I just came down to Chennai yesterday. Walk around Sunday night in Chennai and you understand why the gold price is where it is, why the Indians are bringing in the amount of gold they are. It was absolutely just spectacular – queues out the door. 

The touch and feel and smell of the Indian market always reminds you quite why gold does what it does at times. Phenomenal demand. Everybody I'm speaking to – the kind of rumours going through the market here over the last few days, that gold prices are going to move up significantly again in the next few weeks, have pre-empted buying here. There’s just an appetite at price levels that are quite frankly off the scale for a market like India, but people are still willing to buy. I watched somebody today counting out the better part of US$12 000 in cash, buying some jewellery, buying a few coins and leaving the store – nothing quite like it.

ALEC HOGG: Isn't that also a  concerning feature, because it seems almost like the kind of activity one would see at the latter end stages of a bubble?

PAUL WALKER: Well, I'm hesitant to agree with you too whole-heartedly because, as you know, I have always sounded a cautionary note about where this market is going, and I think the macroeconomic backdrop is still supportive of high prices and for good reason. The concern that you’ve just expressed is one that I would share, though. We've seen this very rapid run-up. There just seems to be a freneticism here about buying, and I think there’s an element of that – not just in India but elsewhere – that does hint of either people being really fearful of where things are going. But perhaps this is also just a reflection of the kind of last-gasp speculative inflow. Quite where we are at the moment? I would err on the side of thinking there’s still legs in this rally – but you are quite right that there is a frothiness out there that is a little troubling.

ALEC HOGG: And the story coming out of Venezuela – that Chavez wants to take his gold back from the Bank of England. Why would that in particular have helped the gold price higher?

PAUL WALKER: I just think that is part of the overall uncertainty. I think the reason for Venezuela taking it back is, from what I understand, related to some legal case. But quite why that should be positive for gold is anybody’s guess. But I guess what it does speak to is a broader theme of genuine uncertainty about the economic cycle, where monetary and fiscal policy is going, where sovereign debt is going – all of these things. And when a central bank decides to remove its metal from the Bank of England, which has been the long-standing custodian of metal in the international bullion market, maybe some people have misinterpreted it. I wouldn’t actually read too much into the fact that … the Venezuelans. It does I guess contribute to an overall feeling of discomfort with things. Quite understandably, when you see what's been happening in Europe and elsewhere, that’s feeding into higher gold prices. That’s not just something that’s happening in the European and the US space, but very much happening in China, India and elsewhere.

ALEC HOGG: Paul, you are originally from South Africa, so you will appreciate this question from many South Africans who are sitting on Krugerrands – they’ve seen the value of Krugerrands go higher and higher. Is this a time to take profit?

PAUL WALKER: Well – he he – I've just had dinner with one of the bigger jewellers in Chennai and he says that he’s fully hedged. But I think he’s probably talking in an Indian way of hedging, which is he is sitting on a large stock of metal but he doesn’t really pry the mark to market which you would in a conventional business. I said to him, “If you are sitting on a very positive mark to market here, perhaps part of the strategy is to start selling your metal, realise the gain, and borrow it back and fund your business?” He looked at me and said: “You know, it has been bothering me a little bit that we are possibly a little exposed. Maybe it’s time to start thinking about it.”

As I would always caution anybody in any investment decision, if you are cutting your position 100% at any point in time, it's probably not the most prudent thing to do unless you are absolutely convinced that something is going to happen. And if I were holding a few Krugerrands, maybe it's time to start thinking about realising some of that gain. I would certainly be inclined to think quite carefully about that, and sell it at the strength of the market. But the reality is that…at GFMS we are now of a view that this rally has probably got legs for the better part of another 12 months, and if the economic uncertainty continues this could continue a bit longer. So it's probably not time to cut the whole position. But I would certainly be looking to realise some of my gains if my mark-to-market were very positive.

http://moneyweb.co.za/mw/view/mw/en/page295799?oid=550254&sn=2009+Detail&pid=287226

Wed, 08/24/2011 - 09:51 | 1594790 Irish66
Irish66's picture

What is the legal case?

Wed, 08/24/2011 - 11:57 | 1595370 citta vritti
citta vritti's picture

I think one or another of oil or other resource nationalizations, and the thought that Venezuelan assets held outside the country might become encumbered with legal claims in the course of international arbitration to compensate the relevant parties.

Wed, 08/24/2011 - 09:32 | 1594735 PulauHantu29
PulauHantu29's picture

You mean Germany does not want Greek Bonds (promises to pay in the future) as collateral?

How strange.....mmmm

Seems as if all the Central Banks are buying gold....must be something to it after all.

Wed, 08/24/2011 - 09:34 | 1594738 sudzee
sudzee's picture

Japanese selling gold? After 20 years of ZIRP the confiscation of the wealth the country by the Gov't is complete. Japanese moms and pops are selling the family jewels, as a last resort, just to feed themselves. Some also have decided to trade in the family jewels for a good quality chinese geiger counter and plane tickets to a "cooler spot".

Wed, 08/24/2011 - 09:47 | 1594773 ShankyS
ShankyS's picture

To emphasize how bad things are, countries are no longer willing to lend on insurance only. As a fundamental flaw in the whole system, all the lending in the past was backed by an insurance contract (CDS). In a move of desperation they are now instituting lending “fundamentals” and now reverting to something archaic in the lending system these days called collateral. What is the problem with collateral? It is of limited supply (not like printed paper). This signals and end to the never ending cycle of unlimited funding which signals the end of unlimited growth. Enter sound lending practices. 

Wed, 08/24/2011 - 09:54 | 1594808 Bicycle Repairman
Bicycle Repairman's picture

Who gives a shit if it is leveraged 1000000000000 X?  The Germans want to hold it.  Just in case.  Gold is all about possession.  Let those who "own" gold held by others deal with it.

Wed, 08/24/2011 - 09:56 | 1594814 Sizzurp
Sizzurp's picture

What I want to know is when will China ask for the US gold as collateral?  When will Saudi want gold as payment for oil?  Now when that happens you know we have reached the Oh shit moment.

Wed, 08/24/2011 - 10:38 | 1595002 gwar5
gwar5's picture
Bingo!  When Saudi demands gold for oil, instead of USD, the dollar screws the pooch. The US military isn't going to be dispatched this time around.

 

Wed, 08/24/2011 - 22:26 | 1597919 Bicycle Repairman
Bicycle Repairman's picture

"The US military isn't going to be dispatched this time around."

 Oh yes it is.

"When Saudi demands gold for oil"

They'll get lead.  The KSA is a joint Anglo-American production.

Wed, 08/24/2011 - 09:57 | 1594819 OpenEyes
OpenEyes's picture

Seems to me that the soveriegns are beginning to sabre-rattle about their gold holdings, other's gold holdings..   Venezuela, Germany, etc...  It's almost as if they're all circling to make sure that they 'get theirs'..  Two things come to mind;

1:  Gold is IMPORTANT and getting moreso

2:  As likely to be the spark for war as Oil or Water

If they're lining up to get theirs, I recommend you go quickly and get yours.

Wed, 08/24/2011 - 10:09 | 1594858 digalert
digalert's picture

heh heh.

Ya we think gold is a barbarous relic...

so we'll take it off your hands to lighten the very burdensome load you carry. It's for your own good.

Wed, 08/24/2011 - 10:28 | 1594943 gwar5
gwar5's picture

They're going Hugo Chavez over in Europe.  Germany: "All your gold are belong to us, bitte!"

 

This is a serious slip up, no wonder they walked it back. Gee, we never saw that one coming. Suddenly, the cat is out of bag on official sovereign levels that gold is the only real money. Sovereign runs on gold? One can only imagine what is going on behind the scenes.

The Germans are making the PIIGS an offer they can't refuse, in a Corleone sort of way. PIIGS should default now and start over with their own gold. Clear now that supranationalism is how the people are going to be ripped off, again.

 

 

Wed, 08/24/2011 - 10:44 | 1595046 Manipulism
Manipulism's picture

Maybe this is the plan.

To bring the Piggs in a situation were they must leave.

Wed, 08/24/2011 - 12:38 | 1595542 PulauHantu29
PulauHantu29's picture

Theme Park Bubble in China:

 

China's National Development and Reform Commission (NDRC)-the bureaucracy responsible for planning China's economy and implementing its five-year plans-has recently forbidden the construction of big new theme parks in China.

 

It's one of many recent attempts by China's central planners to halt a speculative property boom. This pits the NDRC against local governments. And it is evidence that the Chinese property boom is becoming a bigger threat to China's economy, its growth, and thus Australian resource exporters.

 

The LGFVs have borrowed hundreds of billions of dollars from Chinese banks to finance a cornucopia of development projects. The collateral for these loans - when collateral was posted, and sometimes it wasn't - is property. Thus you have a massive property and building boom financed with borrowed money and securitised by rising property prices.

 

Now China is dealing with two aspects of the same problem: a property bubble and a bad loan problem. There are close to 65 million vacant apartment units in China - enough for every Australian to have his or her own overseas crash-pad.

--Does this sound familiar at all?

 

Full story at The Daily Reckoning...a good read!

 

 

Wed, 08/24/2011 - 14:47 | 1596135 hungarianboy
hungarianboy's picture

yeh buy gold let's make the right shoulder around 1820 to go way lower.

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