Gold reserves and EURO countries.
To throw in some additional point for information purposes.
In the beginning of last year when EURO join criteria have been set up, the governments and treasurers of the particular countries (like Germany, France,Italy,Austria, Spain,Belgium...) hat to raise cash by any means to meet state deficit (60% of GDP) and fiscal gross deficit (3% of GDP).
So besides cooking the books ("named: creative bookkeeping") buy shifting debt off state balance sheets into newly created holding companies, they ordered central banks to revalue their gold reserves at market (which they former owned at a fraction of the price), and pass the resulting gain to the state in the form of earnings taxes and dividends.
This is very common to European companies, they are allowed value marketable assets at historic costs, not mark-to-market (with the exemption of bank's trading book), thus having created a lot of "hidden reserves" in former times.
Shortly after that, that fact was widely published and discussed. So most of the book values of gold range between $320 and $380, only Austria being a bit more conservative with an actual book value of $185.). The historic book values have been between $30 and $60 before.
In the meantime gold sank from a $400 high to some $280, and throughout this year it devalued also in DM terms (I printed a chart of XAU against DM currency).
At present everybody is quiet in the financial departments and reserve banks despite they would have to it write down to the lower market price erasing parts of the paper gains from a bookkeepers standpoint. But if the gold plummets further - how will they react?
Buy and average down? Or selling off reserve gold in exchange for foreign currency. Keeping gold reserves is voluntary since the gold covering of the own currency has been abolished in the 70ies.
By any means, without industry demand and no scarcity, I do not see a bigger upswing in gold in the future.
Christian
Disclosure: A meager 3% of my equity is in gold, in terms of several coins and plain jewels. The coins carry an embedded put by facing a quite high ($175) notional value, unconditionally exchangeable in EURO or Austrian Schillings. In Austria you can buy former pledged gold jewels almost at the intrinsic ounce value from auction houses.
Christian |
