By: CHRIS GRAEME
SPIRALLING GOLD prices on the international commodities market means Portugal’s high gold reserves has put the country’s finances on a healthier footing.
Despite selling off substantial quantities of bullion in recent years, Portugal’s gold reserves have reached their highest price in six years as investors snap up gold given worldwide economic uncertainty over rising food prices, oil prices and the crisis in the sub-prime housing credit markets.
Official statistics sent to the International Monetary Fund indicate that the value of gold bullion held by the Bank of Portugal in November 2007 had topped 9762.3 million dollars (6616 million euros), the highest rate since April 2000.
That value would have been even higher if the Portuguese government hadn’t sold off 224.1 tonnes of gold between 2002 and 2006.
In the last week of 2007, the price of gold per ounce reached record levels, gaining an impressive 35.4 per cent on the same period in 2006.
In that time, the gold in Portuguese vaults hidden deep below the Parque das Nações has risen nearly two billion euros in value (1906.6 million euros).
Debt solution
In the last few months alone, since the credit crunch hit hard on the international financial markets, Portugal’s gold has increased in value by 551 million euros. By December alone, that figure, say analysts, could in fact be even higher.
The last time, before 2000 and 2007, that the Bank of Portugal enjoyed the fruits of such high gold prices was at the beginning of the 1980s when an ounce of gold was worth 850 dollars. Now it is worth over 1,000 dollars.
Portugal has always been a country that despite economic difficulties has horded gold bullion for a rainy day. Salazar in particular stockpiled gold bullion by the ton from the Nazis in World War II in exchange for essential minerals and metals needed for munitions.
However, despite the dictator’s prudence, most of that gold was sold off to pay for costly colonial wars in the 1960s and early 1970s.
What to do with so much gold is a question that has always concerned countries like Portugal that have stockpiled so much bullion.
In Portugal, the economist and former finance minister Miguel Cadilhe, who is putting himself forward for the leadership of Millennium bcp, thinks that some of the reserves should be sold off to pay for public administration reforms which would put thousands on the dole.
However, the European Central Bank would oppose using gold reserves to pay off debts, pay for reforms and balance the budget in this way.
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