I´m worried about governments selling their gold to kick the can down the road for a while

[TCE]

Central banks hold a lot of gold as well, so they would likely be buyers if any kind of government sell-off were to occur. As others have mentioned, it is probably for the best that governments sell off their gold from a liberty standpoint because it would be allowing the people to purchase it and probably at a lower price. Sure, some would wind up in a Central Bank vault somewhere or that of another government, but some of it would be purchased by Americans and people throughout the world, so I see it as a good thing.

OP, I'm not sure I understand your concern. If there is a heavy downward pressure on gold for, say, two years, after all of the new gold hitting the market had been bought up, it would continue to increase. Many see gold as a long-term investment/value-holding asset anyway, so regardless, those holding onto their gold over a five or ten year period would make out very well in such a circumstance. If your situation occurs and gold plummets several hundred dollars an ounce, the fools will be the ones selling.

[danda]

Stephen Douglas: Thank-you for educating me about Thiers law. I looked it up, and had a point clarified for me about Gresham's Law, which I thought conflicted with Ron Paul's Competition in Currencies act. Namely, Gresham's law only applies when Legal Tender laws are in effect, requiring people to accept bad money at face value. So obviously, the solution is to remove the legal tender law, as Dr. Paul advocates, and we then arrive in the land of Thiers Law.

Actually, this has been intuitive to me, and I've long advocated removing legal tender laws, but the gresham's law bit nagged at me before.

[Steven Douglas]

This.

Perhaps a VERY small minority of foolish governments will sell their gold (or be coersed into doing so). The truth is, the big dogs are buying the yellow stuff with rabid ferver. That is NOT going to change until the new global financial system is implemented.

There is one other thing I think a lot of people are missing, and that is the MAJOR difference in how governments treat gold as protection of individual wealth (giving it a bottom to fall to, beyond which it can't go), versus how governments treat gold in relation to protecting their own interests from other government interests (quite apart from the people themselves).

Roosevelt, acting as an agent of the banks and banking system, allowed the entire banking system to default on the people themselves, even going so far as to confiscate their gold in return for irredeemable currency (that would continue to be debauched), rather than forcing banks to pay out fractional gold on the debauched currency. Around forty years later, Nixon finally defaulted on all the remaining governments (within a week of Switzerland unilaterally pulling out of Bretton Woods, and three years after DeGaulle had already allowed France's gold, through a new French law allowing full currency convertibility of Francs to gold, to be raped by 30% by the Anglo-American system).

So-called "Nixon Shock" only finally acknowledged that our promise-to-pay-debt-currency, even to governments, had been inflated beyond our ability to ever repay in the gold it was supposedly backed by. France was especially angry at this, because Nixon effectively allowed NY financial interests to exploit France's law in a way that raped France's reserves, but wouldn't bend the American dollar over later to take one in the pooper for France in return.

So, with an historical view on how governments vs. citizens are treated (governments actually have power, understand a little more, and try to actually stand up for themselves), the question remains how governments under any new regime would view gold in terms of backing - and I have no illusions about that. I don't think it will mean that we are protected as individuals, or that gold will somehow be convertible by common individuals - only that the statist systems themselves on the whole are protected from other statist systems, as their gold is used to determine their initial reserves, with the IMF (or whatever it is called) acting as the new Fed.

In other words, I don't think China is encouraging its citizens to acquire gold and silver to protect them, so much as to build up a store of wealth for China that it can later call in, Roosevelt-style, as it issues fractional credits in return, even as all governments, "fer da gud of da glowbul peephole" confiscate gold for the last time, and make individual ownership of gold, with few exceptions, like rationed industrial uses, completely illegal. The gold could end up being the final source of a fractionally reserved global wealth siphoning and redistribution machine - which might even last a couple hundred years. Until, that is, all classes are finally separated by broad, thick, virtually impenetrable lines, before even that system finally collapses, and the final fiat currency is entirely depleted of its value. Then what? Who knows. But I think that's the plan that has already been planned, in great detail, Global Jekyll Island-style, for what everyone knows is inevitable. Whether it succeeds or not remains to be seen, but history tells me its chances of success (not as a system, just in its ability to be implemented) are extremely good. To many boneheads and pointy heads on the left and the right already willing to defend (for their own contradictory reasons) the system we have in place (given that the Titanic hasn't sunk yet, and, why, look at all the good that happened as a result of hitting that iceberg!)

So the Fed rescued the fractional reserve lenders as well as the government, and now that that currency soil is nearly fallow, the New and Improved Global "Fed-by-some-other-name" will swoop in and save the day as it rescues both. And every other like fiat system in the process. Oh, happy day. Whirled Peas only imagined finally manifested.

Oh, Iran, you don't stand a chance, baby. You think we can borrow ourselves into Wars we can't afford now, wait'll you see what's coming next! No war to it, if you don't comply, you're squished.

[Verrater]

China will buy it, if anyone is selling that is for sure.

[Zippyjuan]

I have not followed everything going on in Europe (though I try to follow some of it) so I have not really heard of countries contemplating selling gold to raise money for bailouts but should that occur, it is not likely that the gold will hit the global markets. Most likely situation would be anther country purchasing it or using the gold as leverage (collateral) to borrow funds. Aside from any currency devaluation effects, I would not expect government gold sales to impact the global price of gold. Just my opinion though- I could as easily be wrong.

[swissaustrian]

Seems like I was on to something. FT reports:

Cash for gold in the eurozone bailout
Ever since the eurozone bond markets first started to get the jitters, hedge fund managers have been whispering that gold could play a part in resolving the crisis.
Until recently this discussion has mainly been the preserve of gold market conspiracy theorists and backbench German politicians.
But now the use of gold to fund a eurozone bailout is coming closer to reality. Buried within a draft of the European Commission study on joint 'eurobonds,' reported by the Financial Times this week, is the suggestion that gold could be used as collateral for these bonds.
In order to "enhance" the guarantees on the eurobonds, the draft says, governments could provide collateral, including "gold reserves which are largely in excess of needs in most EU countries."
Between them, the central banks of the eurozone hold 10,792 tonnes of gold -- 6.5 per cent of all the yellow metal that has ever been mined -- worth some $590 billion.
Let's be clear: This does not imply central banks are getting ready to sell gold to bail out the eurozone. Beyond the numerous legal problems (selling reserves to fund government borrowing contravenes the Maastricht treaty), gold disposals just looks too desperate.
But bullion could be used as collateral. In fact, if Europe's politicians truly believe that the problems of larger eurozone countries such as Italy are based on liquidity rather than solvency, the use of gold as collateral could be a neat way to regain the confidence of the bond markets.
For prospective investors (no doubt including emerging market governments, sovereign wealth funds, and the like) the appeal comes from the likely hedge that the gold would provide against a default. If a country such as Italy were to default, most analysts believe, the price of gold (certainly when denominated in euros) would go sky high.
For eurozone countries, gold-collateralised bonds could unlock a large pool of new financing. Italy's central bank, for example, holds 2,451 tonnes of gold, worth about E100 billion. While that pales in comparison to its total debt stock of nearly E2,000 billion, it could alleviate some of the short-term funding pressure.
Italy needs to raise about E600 billion over the next three years. If it used the yellow metal as collateral for the first 20 per cent of the new bonds, therefore, it could cover its needs until mid-2014. A successful sale of the gold-backed debt would create a virtuous circle, making it easier to raise money through non-collateralised borrowing.
Such a deal has precedents. Indeed, Italy has done it before, when it received a $2 billion bailout from the Bundesbank in 1974 and put up its gold as collateral.
In 1991 India used its gold as collateral for a loan with the Bank of Japan and others.
And in 2008, according to the World Gold Council, Sweden's Riksbank swapped its gold to raise cash and provide liquidity to the Scandinavian banking system.
As Paul Mercier, then deputy director of market operations at the ECB, told a gold industry conference in 2009: "In a generalised crisis that leads to the repudiation of foreign debts or even the international isolation of a country ... gold remains the ultimate and global means of payment that is still accepted and it is one of the reasons used by some central banks to justify gold holdings."
The problem is, as that statement implies, that countries have historically turned to their gold reserves only in the direst of situations. And lenders are likely to require that the gold is moved to a neutral location. India's move to ship 47 tonnes to the Bank of England in its 1991 deal caused outrage within the country.
Nonetheless, as the eurozone crisis grinds into its third year, it might just be time to dust off those Roman coins in the Banca d'Italia's vaults.

http://www.ft.com/intl/cms/s/0/c7f61...44feabdc0.html

[gerryb]

I hope they put it back on sale for $250

[Acala]

it's a legitimate fear if you can't afford to lose money in the near future. Good for people who can wait it out for 3-4 years. look no further than 2008.

It is a bad idea to invest money in gold if you need that money to live on in the short term. I have never seen any of the gold bugs on this forum advocate spending your lunch money on gold. So if all you have invested in gold is savings and not money you don't need immediately, then a drop in the price of gold for a couple years is unimportant except as a further buying opportunity. You don't lose money on an investment until you sell at a low price. So don't sell at a low price. BUY at a low price.

[jkr]

traaaaaaaaaaa-DITION!

[llepard]

There is no doubt that Central Banks will try to imply that they are selling gold. But, that will be a head fake. The writing is clearly on the wall.