Gold As Bailout Blackmail?

The price of gold has dropped $80 an ounce in the past five days. Has gold lost its luster?

Some quick considerations:

  1. As reported last week, government central banks were buying gold as a hedge against inflation. Banks are not in business to lose money.
  2. Gold has rebounded (up $22.20 today) and it is up 2.48% over the past 30 days.
  3. No economic indicators have improved that would impact the price of gold in the past week.

Silver is a different matter. Its price was based on rampant speculation and it lost over 30% in the past five days before rebounding slightly today to $35.61. It has lost just under 10% of its value over the past 30 days.

As the following story details, gold is still the key to a strong currency even if the country is using a fiat currency. Will Germany end up with Portugal’s gold as part of their bailout?

David DeGerolamo

Top German Politicians Want Portugal To Dump Its Gold In Exchange For A Bailout

German politicians don’t want to give Portugal its bailout cash until it sells its own assets, according to the International Business Times. 

Norbert Barthle, who is a member of Angela Merkel’s party and budget speaker, as well as his Social Democrat rival, Carsten Schneider, have both called for Portugal to think about selling its gold

Frank Schäffler, a member of the FDP party in coalition government, is more adamant, saying that Portugal should have to “sell their silverware” including gold, before they receive a bailout.

While the bailout package has been agreed to, economic ministers from the eurozone still need to approve the package in a vote on May 16.

As domestic pressure rises, German Chancellor Angela Merkel may force changes in the bailout package, or a higher interest rate on Portugal’s loans in order to appease her domestic constituencies.

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