Market Nuggets: Barclays: Gold Sales Would Not Be 'Golden Ticket' For Troubled European Nations

14 February 2012, 9:33 a.m. 
By Kitco News 
http://www.kitco.com/


(Kitco News) - Barclays Capital says any potential sales of gold, held by deeply indebted European nations, would not offer a “golden ticket” to get them out of financial trouble. Some European nations are substantial holders of gold relative to total reserves, Barclays says. For example, analysts say, Italy holds 2,451.8 metric tons, making up 71% of its total reserves. Greece holds 111.6 tons, making up 83% of its reserves. However, even if Italy sold all of its gold reserves, the $130 billion it would receive is only 6% of Italy’s debt, Barclays says. Greece would fetch $6 billion, but this represents only 1% of total outstanding debt. “Although the Central Bank Gold Agreement limits sales in any given quota year (ending in September) and the use of gold proceeds in relation to debt, it could technically be revised in extraordinary circumstances, given the current environment is unprecedented, but this may cause far greater reputational damage,” Barclays says. “But we believe, even beyond the technicalities, selling gold reserves is not a ‘golden ticket,’ as it would very much be a short-term fix and, perhaps more importantly, weaken balance sheets by switching out a hard asset.”