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Portuguese Gold Sale Urged by Senior German Lawmakers as Mexican Central Bank Buys 100 Tonnes

Gold is mixed while silver is down some 1.5% again today. Weakness is being attributed to profit taking, momentum-driven traders and rumours regarding selling of gold and silver by George Soros's fund.

Cross Currency Table

The Soros rumours came from unidentified sources ("people close to the matter"), are unsubstantiated at this stage and should be viewed cautiously until there is official confirmation and or we see the SEC filings showing Soros Fund Management has been selling their gold and silver ETF holdings .

Gold in Real Terms - Bloomberg Inflation Adjusted (CPURNSA) - 40 Year (Monthly)

It should be remembered that this may be a case of simply taking profits and reducing allocations. There may also be the possibility that Soros Fund Management is selling some of their gold and silver ETF holdings in order to buy bullion in allocated accounts as Eric Sprott, David Einhorn and some other hedge fund managers and pension funds have been doing.

Those calling gold a bubble know little or nothing about economic and monetary history and monetary economics today. Gold is increasingly being seen as a monetary asset and as an important reserve currency by central banks internationally.

The drumbeat of a return to some form of gold standard is increasing and President of the World Bank Robert Zoellick's comments to the Financial Times regarding returning to some form of gold standard suggest that monetary authorities internationally may be planning a return to a quasi-gold standard in order to restore stability to currency markets and recreate trust in fiat currencies.

Senior German Lawmakers Urge Portuguese Gold Sale

Another sign of the increased appreciation of gold as an important asset came from Germany today where Angela Merkel's budget speaker and his opposition counterpart have urged Portugal to consider selling their gold.

Norbert Barthle, Germany's governing coalition budget speaker and his counterpart Carsten Schneider from the Social Democrats, the biggest opposition party, urged Portugal to consider selling some of its gold reserves to ease its debt problems. They called for a review of Portugal's request for financial aid to include gold and other potential asset sales.

The German lawmakers did not specify who should buy the gold from the Portuguese central bank but given the challenges facing Germany and the Eurozone, it is likely that the Bundesbank and the ECB would be willing buyers - if the gold is not already encumbered due to Portugal's membership of the Eurozone.

Interestingly, there was an article in the Times of London on Monday suggesting that the Portuguese gold reserves (worth some $20.7 billion at today's prices) be used to fund their bailout (see news).

Meanwhile creditor nations' central banks continue to accumulate gold reserves as seen with the breaking news from the Financial Times that the central bank of Mexico has been diversifying their currency reserves (largely in dollars) into gold with the purchase of 100 tonnes of gold bullion in February and March.

Debtor nations with large gold reserves may be forced to sell gold reserves to creditor nations in the coming years as has been the pattern throughout history.

Silver in Real Terms - Bloomberg Inflation Adjusted (CPURNSA) - 40Year (Monthly)


Gold is trading at $1,535.75/oz, €1,031.45/oz and £928.33/oz.


Silver is trading at $40.92/oz, €27.48/oz and £24.73/oz.

COMEX silver futures have lost a significant 15 percent over the past four sessions, wiping out the recent gains which took the price to a 31-year nominal high at just below $50 at $49.79/oz on April 25.

Further weakness may be seen due to the leveraged nature of futures markets and the COMEX and the ability of large concentrated positions to manipulate the futures and spot price in the short term.

However, the fundamentals driving the market should see any correction be of short duration and bullion buyers should continue to gradually accumulate and buy on the dips. In time this correction will be seen as all previous corrections are seen today - as a correction in a "wall of worry" secular bull market.

Platinum Group Metals

Platinum is trading at $1,857.00/oz, palladium at $755/oz and rhodium at $2,250/oz.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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