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

Submitted by Tyler Durden
08/24/2011 08:21 -0400
From GoldCore
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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,