Member access

4-Traders Homepage  >  News

News

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesHot NewsMost Read NewsRecomm.Business LeadersVideosCalendar 

World Gold Council : Gold-backed bonds offer an alternative to austerity, confirms new white paper

11/11/2012 | 08:17am US/Eastern
11 Nov, 2012

Download this document (0.1 MB)

A report published by leading monetary and Eurozone academic Professor Ansgar Belke, suggests that those Eurozone Member States worst affected by the sovereign debt crisis, with sufficient gold reserves, could use their gold as collateral to reduce debt servicing costs.

Gold-backed sovereign debt or a 'gold-backed bond' is debt, which is partially secured by gold. Using a portion of a nation's gold reserves in this way would be a temporary step to recovery for Eurozone Member States, enabling them to borrow more cheaply through bridge-financing.

Professor Belke is a Monetary Expert Panellist for the Economic and Monetary Affairs Committee of the European Parliament and is the Jean Monnet Professor at the University of Duisberg-Essen. Commenting on the report Professor Belke said:

"Using gold as collateral for new sovereign debt issues would alleviate some pressure in the short term and facilitate a return to growth. Gold-backed bonds would have an advantage over the existing non-conventional monetary policy tools, such as Outright Monetary Transactions (OMT), introduced by the European Central Bank (ECB) to tackle the Eurozone debt crisis to date. The ECB's balance sheet would be largely unaffected in the end, as the gold that sits within national central bank reserves would be more than sufficient to collateralise the bonds. It would lower sovereign debt yields without increasing inflation and would give some of the Eurozone's most distressed countries additional time to work on economic reform and recovery."

The report notes that not all Eurozone countries have enough gold in their reserves for this to be a viable solution. However, for those with significant holdings, relative to their short-term financing requirements, such as Italy and Portugal, this represents a real alternative.

Italy and Portugal hold gold reserves of 24 and 30 per cent of their two year funding requirements respectively. In the case of Portugal, the paper demonstrates that a sovereign bond backed by one-third gold could reduce yields on sovereign debt by around one third.

Natalie Dempster, Director, Government Affairs at the World Gold Council, adds:

"While there are clearly important political and legal considerations that need to be addressed, gold has been used in the past to secure loans in Portugal, Italy and India and such a measure would certainly offer a partial solution to Europe's current woes and an alternative to austerity measures."

The report entitled 'A more effective Eurozone monetary policy - gold-backed sovereign debt', was commissioned by the World Gold Council to independently evaluate and test its proposals on the use of gold as collateral for Eurozone sovereign debt.

For more information and to download the white paper

Brenda Bates
World Gold Council
T: +44 20 7826 4706
E: brenda.bates@gold.org 

Claire Maloney
Capital MSL
T: +44 20 7307 5341
E: claire.maloney@capitalmsl.com 

Download this document (0.1 MB)

distributed by
React to this article
Latest news
Date Title
11m ago NRTH ST TELE'A' : Redding Record Searchlight, Calif.. Buzz on the Street column
11m ago NRTH ST TELE'A' : Enterprise's Tomasin named section defensive MVP
14m ago WAL MART STORES : -Mart: No 'plans' slated for Hubert acreage
18m ago MINDAX : Disclaimer
32m ago CON WAY : Elves & More of Northeast Ohio and Con-way Freight Deliver Christmas Surprise
32m ago PETROLEUM & RESOURCES : The Many Firsts of Diezani Alison-Madueke
33m ago Britain weighs up oil industry calls for North Sea tax breaks
36m ago MERCK : buys new-cancer-drug firm
37m ago ASHBURTON VENTURES : Six share win Six Ashburton workmates will each be more than $33,000 richer this Christmas thanks to winning Lotto. The First Division Lotto win from Ashburton ...
38m ago Obama says Sony hack not an act of war
Latest news
Advertisement
Hot News 
DENDREON : Entry into a Material Definitive Agreement, Change in Directors or Principal Officers, Other Events, Financial Statements and Exhibits (form 8-K)
DIXONS CARPHONE : *exane bnp raises dixons carphone price target to 510 (450) pence - 'outperform'
BERKELEY MINERAL RESOURCES : Obsidian IR
NATURE : Warns 2014 Results To Be "Materially" Below Market View
FINISH LINE : Reports Third Quarter Fiscal Year 2015 Results
Most Read News
1d ago COMCAST : DISH, Comcast SportsNet reach deal in regional dispute
1d ago APPLE : Innovation – The Apple way
1d ago INDUSTRY ANALYST JEFF KAGAN : Will AT&T GigaPower Beat Google Fiber
1d ago MACY : When Apple Pay Requires a Signature and When it Doesn't
1d ago FRANCESCA : announces new CEO amid faltering sales
Most recommended articles
32m ago Britain weighs up oil industry calls for North Sea tax breaks
37m ago Obama says Sony hack not an act of war
2h ago OPEC's Badri says hopes for oil price revival by end H2 2015
2h ago British upstart banks get IT boost to take on big rivals
2h ago Saudi Arabia says won't cut oil output even if non-OPEC nations do
Dynamic quotes  
ON
| OFF