Portugal is currently sitting on gold reserves worth more than 16 billion euros, which is up 1.4 billion euros on its value at the beginning of the year. Its gold reserves currently amount to 382.5 tonnes - more than that held by the United Kingdom and almost double the amount held jointly in the vaults of major gold-producing countries South Africa and Australia.
Due to these huge reserves, and in a bid to ease the burden the bailout has had on Portugal, neutral analysts have called on the European Union to give Portugal the go-ahead to delve into these stocks, but only to give them up as a guarantee at substantially lower interest rates being charged by the EU’s major shareholders and the IMF.
The World Gold Council (WGC) suggested earlier this month that the European Parliament pushes for Portugal to be allowed to offer gold as collateral for sovereign debt issuance.
“Portugal has gold reserves in excess of 20 percent of its financing requirements over the next two years”, the World Gold Council said in a report based on research done on its behalf by the London-based group, Europe Economics.
Portugal’s gold is not the collective property of the Eurozone and is the sole beneficiary of the gold held at the Bank of Portugal in Lisbon.
But it would still need EU approval to associate its gold with any financial transaction.
The WGC stresses the obvious point that money (euros) “is abstract – numbers on a computer screen. By contrast, gold is concrete. Gold bars might sit in a warehouse or a vault. Creditors could go see them.”
While its stressed monetary actions raise considerable issues of reliability, “the concreteness and simplicity of gold as collateral makes it more credible.
“Physical gold bars could be transferred to a third party location (e.g. London). The Portuguese government would get them back when their debts were redeemed and would not get them back if they defaulted. It is difficult to see how a policy could be more credible”, the European Economics report argues.
Despite the substantial quantity of gold held by the Bank of Portugal on behalf of its citizens, the last occasion its gold was touched was in September 2006, when 20 tonnes was sold off. Despite its gold vault being closed for business the past six years, Portugal’s gold reserves are half now of what they were in 1975.
Nonetheless, Portugal’s reserves represent the highest proportion of GDP (9.49 percent) in the developed world, and when including all nations is only behind Lebanon which stands at 10.32 percent.
Meanwhile, data for October 2012 shows the United States as the overwhelming leader of gold reserves in the world, with a stock amounting to 8,133.5 tonnes, followed by Germany in a distant second with 3,395.5 tonnes. Next on the list is the IMF with 2,814 tonnes, Italy (2,451 tonnes), France (2,435.4 tonnes), China (1,054.1 tonnes), Switzerland (1,040.1 tonnes), Russia (936.7 tonnes), Japan (765.2 tonnes), the Netherlands (612.5 tonnes), India (557.7 tonnes), the ECB (502.1 tonnes), Taiwan (423.6 tonnes) followed by Portugal on 382.5 tonnes.
It has also emerged recently that while the state holds onto its gold riches, its citizens are ridding themselves of the metal at a record rate. Last year, an estimated 13 tonnes of second-hand gold were exported out of Portugal. Most of this gold was obtained by melting down jewellery purchased off desperate consumers by the more than 5,000 registered gold buyers in Portugal.