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« Gold and Silver A Few Thoughts | Main | First Majestic Silver Corporation: Silver Sales Direct to the Public »

The Italian Job

Western Europe’s Gold Hoards 27 July 2009.JPG

THERE ARE ONLY so many ways you can say "No" in Italian (just the one, in fact, that we know of here at BullionVault), and the Bank of Italy has worn them all out in defending its gold hoard so far this decade.

Little love's lost, in short, between the Banca and the Treasury in Rome. But somehow, things just took a turn for the worse.

"We always knew they didn't get on," as Stefano Sansonetti wrote at Italia Oggi back in late June. In fact, finance minister Giuli Tremonti and Banca d'Italia governor Mario Draghi make the UK's Alistair Darling and Mervyn King look like the best of pals. (Though they might seem more chummy than ex-US chief Hank Paulson and Fed chair Ben Bernanke before too long...)

The above is an except from an article published on Bullion Vault by Adrian Ash, on 22 July 2009 who runs the research desk at BullionVault,

Its interesting to observe the pull and push squabbling that goes on over gold, should it be held or used when a particular government finds itself up against the wall. The article goes on to say the following:

On June 29th the Treasury on Via XX Settembre tried to throw a net around the Gold Bullion stored beneath Rome's Palazzo Koch. It stands at 2,451.8 tonnes – the third largest central bank hoard in the world. And there it's stood – unchanged at 2,451.8 tonnes – for the last 11 years or more.

That makes Italy the only Eurozone nation not to sell any of its gold reserves since 1998. It's also the only signatory to the Central Bank Gold Agreements of 1999 and 2004 not to sell any gold either. Which makes you wonder why it bothered to take out its pen.

Despite agreeing to the CBGA's 400-tonne per year limit in 1999 and then signing the renewal – with its new 500-tonne ceiling – five years later, the Banca d'Italia failed to sell one single gram, let alone an ounce or a tonne. Not at any price. Not at €250 an ounce a decade ago. Not at €500 an ounce in spring 2006. Not at €750 an ounce in Feb. 2009.

Italy's fellow CBGA signatories, in contrast, have shrunk their gold reserves by more than one quarter on average.

As it stands the Italians certainly look to have outplayed their European partners, however if the pressure mounts they may be forced to sell some of their holdings which could have a depressing effect on gold prices.

What next? Italian politics are famously messy, and never more so than when the Banca d'Italia fights with the Treasury. But now the European Central Bank is involved. The scrum could threaten to crash into the crowd.

Should the ECB add its weight to the sell side then the pressure will really be on, however, the Banca d'Italia wont be bullied and could out think the ECB if push comes to shove and delay any sales plan for a considerable time. The shadow of Gordon Brown overruling the Bank of England and disposing of a large portion of the United Kingdoms gold serves as a reminder of just how easy it is to get it wrong.

Have a sparkling day.

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Banca d’Italia 27 July 2009.JPG

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Reader Comments (2)

Kudos to the Italians for having the foresight to hang on, so far...I bet China would be happy to take several hundred tons off their hands...

"...the scrum could threaten to crash into the crowd..." LOL, you Kiwis slay me! Too funny...

Snakeman Scott (in the USA)

July 27, 2009 | Unregistered CommenterSnakeman

Che' sara, sara. Molto bene.


July 27, 2009 | Unregistered CommenterJohn Ell

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