Reported from gold traders – The Bank of Spain’s sale in May comes on top of the 80 metric tons it sold in March and April, according to Neal Ryan, director of economic research at Blanchard & Co.
“That means they have sold over 25% of their gold reserves in three months into the market,” he said in an e-mail. “That’s not diversification, that’s trying to fend off an economic meltdown in a major economy.” (marketwatch)
Spain’s Economy Minister Pedro Solbes said on Wednesday that the proceeds had been reinvested in bonds.
“Gold is not a profitable asset,” he said in answer to questions in the Senate.
Or does he simply just need the money in a hurry? More likely as gold has been a rising asset for four years now, and most analysts see it rising a lot further, especially when Spain stops dumping multiple tonnes onto the market.
Bonds tend to fall when interest rates rise. Euro interest rates are currently rising so bonds are not likely to be much good to Mr Solbes compared to gold.
Was he buying government bonds which would hand the Spanish government badly needed cash, but are likely to be a lousy investment longer term? Expect more distress stories from Spain.