The price of gold has dropped $80 an ounce in the past five days. Has gold lost its luster?
Some quick considerations:
- As reported last week, government central banks were buying gold as a hedge against inflation. Banks are not in business to lose money.
- Gold has rebounded (up $22.20 today) and it is up 2.48% over the past 30 days.
- 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?
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.