Spain's Holdings, of Foreign Currency has Fallen £9.02bn

Spain's Holdings, of Foreign Currency has Fallen £9.02bn

www.financialsense.com

The Banco de Espana's holdings of foreign currencies and gold have fallen to €13.2bn (£9.02bn), equivalent to 12 days of imports, according to their website. Last week saw a continuation of their sales of gold of, possibly, in the region of 10 to 15 tonnes more.
Over the past two months the Banco de España has sold off 80 tonnes of gold.
The bank has reduced its holdings of U.S. Treasuries, British gilts, and other investments at a similar rate. Total reserves have now fallen by 2/3.

(visit the link for the full news article)

Apparently the U.S. is not the only country that could be apparently in finantial trouble. It seems that at least Greece and Portugal are in a similar predicament according to the article.

Anyone from Spain, Greece, or even Portugal that can expand on this article?

www.financialsense.com
(visit the link for the full news article)

[edit on 25-5-2007 by Muaddib]

Like I don't know too too much about economics, but if they are dumping their foreign reserves and securities, perhaps they are attempting to pay of their debts so as to not be caught off gaurd in an impending economic crisis?

Originally posted by DYepes
Like I don't know too too much about economics, but if they are dumping their foreign reserves and securities, perhaps they are attempting to pay of their debts so as to not be caught off gaurd in an impending economic crisis?

The problem is that they have also been selling their gold in great quantities. Gold is what backs paper currencies, without gold there is nothing real to back those paper currencies.

Hmmm, do we know if they are holding any sizable quantiyties of other precious metals, such as Paladium, platinum or silver?

I have heard paladium is set to climb close to the price of platinum, so selling off gold may not be as devastating if they are also holding other precious metals. I do not believe we would be able to find out unless we can find someone connected with their treasury department no?

The following link shows what the Spanish government is saying is their reason for selling so much gold from their reserves.

Spain Shifting Reserve Assets To Bonds From Gold - Fin Min
Wed, Jun 6 2007, 16:11 GMT
www.djnewswires.com...


Spain Shifting Reserve Assets To Bonds From Gold - Fin Min

MADRID (Dow Jones)--The Bank of Spain's recent gold sales are part of a strategy to shift its reserves into more profitable fixed-income instruments, Spanish Finance Minister Pedro Solbes said Wednesday.

"What we aim to do is to sell gold, an unprofitable asset, to reinvest in bonds, which are more profitable," a Solbes spokeswoman quoted the minister as saying in answer to a question about the gold sales in a Senate hearing.


"The objective of our reserves is to maximize their profitability," Solbes said.

The Bank of Spain sold 28 tons of gold in May, and 40 tons in both April and March, accounting for the bulk of recent sales made by the Central Bank Gold Agreement signatories.

www.fxstreet.com...

I am no expert in economics, so perhaps someone else can explain the reasoning behind the Spanish government claims.

What I know is that gold is one of the main reserves which backs the currencies of countries such as Spain.

Spain is on the Euro now, so I'm not sure what their central bank even does, I think the German central bank is pretty much in charge of the Euro.

I'm not an expert on it either though.

I am from Portugal and I am not aware of any reduction of our gold reserves.

We did it some time ago, maybe two years ago, I will try to find more information about this.

As for the reason, my knowledge of economy is very limited (as anyone who knows me can see ), but I think that they prefer greater gains in short term that the guarantee that gold gives at a long term.


djohnsto77
The European Central Bank is the one responsible for the Euro.

From what I have seen, there is a agreement between the national banks from 14 countries to sell gold to buy different currencies, but I don't know if this is enough to account for those sales by Spain.

If Spain is also selling foreign currency then I guess that they are not doing this just to comply with the agreement.

Portugal and Greece are two countries in which the percentage of the gains made by the national banks just because of the value of the gold reserves is very high, so countries in this situation could sell gold to try to make their gains less connected to the gold value.

Originally posted by ArMaP

The European Central Bank is the one responsible for the Euro.

Ok, but it's based in Germany and modeled after the German Bundesbank.

The gold bugs must be fuming. This must be what was fueling the downward trend gold has been experiencing lately.