Italy could easily cover its debt by selling just some of its gold reserves.
(1888PressRelease) December 22, 2011 - MIAMI, FL - Writing for The Wall Street Journal's Marketwatch, journalist Brett Arends wonders whether some beleaguered European nations may not have to consider selling their gold, or if they maybe already have started to do so. As there are less and less buyers to be found at bond auctions, selling the national store of gold could be the last resort that is needed to solve some countries' debt crises. Italy, for example, has the world's fourth largest gold reserves (after the US, Germany and the IMF). Certainly, Italy's gold is worth more than enough to cover its entire national debt - and spare.
If individual investors are advised to keep gold as an insurance policy then it makes sense for countries to do the same and a debt that cannot otherwise be repaid may well justify cashing in the insurance policy. Consider the hypothetical family that has a huge credit card debt it cannot repay. Efforts to increase family income and/or decrease outgoings (increase GDP, raise taxes and introduce austerity measures) fail to address the debt. Yet, the family owns several ounces of gold. What would you do? Certainly the temptation to sell the gold would be pretty strong!
"Ironically, should countries actually start selling their gold, this could serve to push the price of gold down, at least in the short term but in the long term it ought to be bullish for gold," says Bill Hionas of Pan American Metals of Miami. "Mr Arends argues that, if or when countries sell gold, there is a corresponding shift in the balance of power. We all know that the price of gold should rise when there is political upset."
Pan American Metals of Miami, LLC is a group of traders, investors and account executives that combines many years of experience to help clients invest in bullion. PAMM provides an individual investment service and is based in Miami, Florida for convenient access to both North and South American investors.