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
In the same category

Where is Greece’s gold?

IMG Auteur
Published : March 05th, 2012
531 words - Reading time : 1 - 2 minutes
( 6 votes, 3.2/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...

 

 

 

 

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.


Article originally published at Goldmoney.com

 

 

Data and Statistics for these countries : Germany | Greece | Venezuela | All
Gold and Silver Prices for these countries : Germany | Greece | Venezuela | All
<< Previous article
Rate : Average note :3.2 (6 votes)
>> Next article
FinanceAndEconomics.org is the website of Alasdair Macleod, who has a background as a stockbroker, banker and economist. Alasdair is available for seminars, speeches and interviews. Please check on Services to get further detalils.
WebsiteSubscribe to his services
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Bitcoin in Perspective: Bill Gates Worth More, Gold 200 Times More
22 JunDavid C.1
Yes Mish, but bitcoin and the wealth and debt burdens of the world are fully backed by electrons which are very light. Unlike that 68 ft glob of m...
Absent Without Leave
21 JunS W.
Bail ins for sure. It was agreed at the G20 in Brisbane. You are not really a share holder. You are an unsecured creditor to the bank a...
Absent Without Leave
19 JunJ.3
Perhaps all the international shenanigans are the smoke and mirrors intended to obfuscate the view of the looming financial catastrophe. When the ...
Gold Price Cuts Post-UK Election Loss, ETF Investors Sell, Nasdaq D...
16 JunSam Maher
"the SPDR Gold Trust (NYSEArca:GLD) – saw its sharpest liquidation since March in the week-ending Thursday, with shareholders cutting the fund's si...
Things To Come
13 Junkevthorne3
If voting for 'parties' actually made a difference they would have not legalised it. Since 1914, it's been the supply of currency that has governed...
Things To Come
12 Jun Roygbiv0
And JHK ruined your life because he then voted for Obamba ? For Jim C.
Things To Come
12 JunJim C.-1
Surely Kunstler cannot be ignorant of economics, of the direct correlation between the production of wealth and Capitalism, and the subsequent crea...
The Escape from Collectivism - Jeff Thomas
10 Junsam_site-2
As I said before, collectivism depends on handicapping the public to create a nation of clinging, helpless, entitled patients and is a top priority...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS