Europe’s debtors must pawn their gold for Eurobond RedemptionEach of the struggling nations must pledge 20% of their debt as collateral. With the fund "officially" at €2.326 trillion as of
November 2011, 20% is €465.2 billion. Let's assume the
best-case scenario wherein 100% of each nations' gold is used, diluting the price level of the metal.
Officially reported gold holdings show the EU totaling 11,494.1 tonnes. That's about 370 million troy ounces (3.7x10^8 * 32150).
Now let's see how Europe's gold would be valued if
all of it were pledged to the 20% requirement:
€465.2 billion divided by 370 million troy ounces comes to ~€1,257/toz or ~$1,572/toz at $1.25 per Euro. Very close to today's prices - isn't that interesting...
Remember, the above was assuming
all of Europe's official gold were stripped to back estimates from
six months ago, and it's obvious that no Euro country is going to give up its gold easily.
How much greater is the amount being called for in the plan now, with debt levels expanding
geometrically: 3 trillion, 5,
more? How much gold will be pledged as collateral: 50% doesn't seem realistic, maybe 10-20%?
It doesn't take much to connect the dots and see that the EU plan alone could easily more than double the gold price, and we haven't even gotten to private debt and numerous distressed nations, especially Japan or the US. Anyone expecting
physical gold to falter from here is operating on assumptions
half a year out of date, on top of the consistently gross underestimations that official sources provide; gold at $1,570/toz was a reasonable price when $1,900 was breached.
It's also important to keep in mind that
fiat inflation is happening
right now.
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