Wednesday, February 15, 2012

Eurozone national gold holdings represent a fraction of public debt

There has been talk that some Eurozone nations may or should sell their gold reserves in order to pay down a portion of their debt or cover certain new debt they are unable to sell. Part of the rationale for this line of thinking is the fact that gold constitutes a large portion of many nations' total reserves. For example Italy's gold holdings make up 71% of the nation's reserves, while Greece's gold position makes up 83% of its reserves.

Unfortunately these gold reserves are a drop in the bucket compared to these nations' outstanding debt. Italy's $130bn worth of gold is 6% of their total debt outstanding (which is actually higher than it is for the US). For Greece that number is closer to 1%. Selling these reserves would provide little relief for these nations and only on a temporary basis. It is therefore unlikely we will see any substantial sales of gold by Eurozone governments.

Source: Barclays Capital
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