Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
Gold & Silver Prices in

Where is Greece’s Gold? - Can You Spell D-E-R-I-V-A-T-I-V-E?

IMG Auteur
Published : March 05th, 2012
628 words - Reading time : 1 - 2 minutes
( 2 votes, 5/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...

 

 

 

 

"... With a sight account, the depositing central bank merely has a counterparty claim on its gold deposits, which allows the Fed or BoE for example, to sell, swap or lease the deposited gold as it sees fit: sight accounts are simply a means for a central bank to expand the apparent supply of gold in the same way a commercial bank expands bank credit."




Alasdair Macleod writes: Recently there have been reports that if Greece defaults on the new bail-out package, creditors will be entitled to seize her gold. Whether or not this is true, it raises one big question: given the severe financial and economic crisis in Europe, what is the current collective attitude of the eurozone central banks to gold?

Bear in mind that these central banks sought to end any monetary role for gold after the Bretton Woods system fell apart in the early 1970s. More recently, as signatories to the three consecutive Central Bank Gold Agreements, they have perhaps seen gold as a source of funds as well. But those were “happier times” for them, when progressively greater central planning and increased regulation went unchallenged by the markets. But now that monetary authorities are facing increasing criticism, the central banks’ strategy towards gold today must logically be completely different: either gold is an asset whose value has to be maximised as collateral, or it has to be held on to as a “last resort” asset. Vested interests have fundamentally altered with the change in circumstances now forced upon eurozone governments.

The rise in gold prices to current levels underlines the point. Based on official figures, the eurozone’s share of official gold holdings as a proportion of the total global stock has fallen from 9% when the euro was introduced to only 6% today. Furthermore, an unknown quantity of this gold is held at non-eurozone central banks, particularly the Federal Reserve, Bank of England and the Bank for International Settlements, in sight accounts. With a sight account, the depositing central bank merely has a counterparty claim on its gold deposits, which allows the Fed or BoE for example, to sell, swap or lease the deposited gold as it sees fit: sight accounts are simply a means for a central bank to expand the apparent supply of gold in the same way a commercial bank expands bank credit.

The ability to create gold through the sight account system has been fundamental to bullion market liquidity in the major trading centres since the Second World War. Problems will arise when confidence in the system is questioned: for example, how much of Greece’s gold actually exists, and what has happened to any gold Greece transferred to the European Central Bank as its joining fee? This question is suddenly relevant to all central banks, not just the 17 euro-area members. We don’t know if this was in Hugo Chavez’s mind when he demanded the repatriation of Venezuela’s gold, but it may well have been. The subject has also been raised by investigative journalist, Lars Schall, with respect to Germany’s reserves at the New York Fed.

As central bankers mull the point over they may well conclude that among all their troubles there is one more that must be avoided at all costs: the possibility of a gold run by the smaller central banks on their larger peers in the major bullion trading centres. It would be a consequence of the deepening crisis involving fiat money and credit, and if this is allowed to occur all confidence in paper money itself would be at risk.

Alasdair Macleod runs
FinanceAndEconomics.org, a website dedicated to sound money and demystifying finance and economics. Alasdair has a background as a stockbroker, banker and economist. He is a Senior Fellow at the GoldMoney Foundation.



 

 

Companies Mentionned : Gold Holdings |
Data and Statistics for these countries : Greece | Venezuela | All
Gold and Silver Prices for these countries : Greece | Venezuela | All
<< Previous article
Rate :Average :5 (2 votes)
>> Next article
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Evolution of YouTube: Will it Su...
17:23prljr
It all depends on how much control the j-mafia will buy into like any other enterprise that can be purchased. Makes it easier if you can print your...
North Korea Threatens White Hous...
17:19prljr
The president said the hack on the Hollywood studio was not an act of war but was “very costly”, To whom is it costly? Not having t...
Lessons Learned from the Suisse ...
16:47sneezy67
Hello Switzerland....goodbye Switzerland :: Hello USA...goodbye USA :: Hello financial elite...you have had your way for 100's of years...kiss my ...
Sick Market Moves While Gold Rem...
16:27sneezy67
Oh..... the agony and many pains it must be as a financial analyst (prognosticator ?)
Chinese Copper Elephant
21 Decovertheedge
If some of the central African countries, such as Nigeria, get their politico-economic acts together, then increased demand for base metals, especi...
41 Facts about Central Banks no ...
20 Decprljr
Common sense and logic dictate that if this was taught in schools it would not exist as it has these past 100 yrs. The monetary system is a CON a L...
41 Facts about Central Banks no ...
19 Decsamking73
I'm not sure that much was taught about the central banking system back when I was in school...25 + years ago. At least not the important parts.
Gold & Silver Market Morning
19 Decend
If you trade XAU/RUB and have bought XAU using RUB, you should have closed your position as he advised. Then you should have switched, buying gold ...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Comments closed
Subscribe to 24hGold’s daily market briefing
  • Prices and data of precious metals in 119 currencies and world mining companies
  • Daily analysis of the economy, markets and more
  • Free, daily and indispensable
Stay informed, subscribe now !
* Your email will never be shared.