More than 3,000 metric tons of gold, the world’s fourth biggest holding and a symbol of French independence, is busy doing nothing in vaults under Paris’s streets.
It’s the doing nothing part that rankles France’s frenetic new Finance Minister Nicolas Sarkozy, The Associated Press reports. In a radical move, he is mulling selling a chunk of the Bank of France’s treasure to help plug huge holes in French public finances.
A gush of French gold onto world markets will not likely result in cheaper wedding rings or jewelry in the short term, the AP reports. But such a sale by a country that long coveted gold as a counterweight to the U.S. dollar would, analysts say, underscore the cooling of a love affair with the precious yellow metal.
Sarkozy first floated the possible sale of gold and other assets last week, just eight days after President Jacques Chirac moved him from the Interior Ministry in a Cabinet reshuffle.
Chirac apparently hopes that Sarkozy, who cut crime as interior minister, can do the same thing for France’s 1 trillion euro ($1.19 trillion) debt and help restore faith in his conservative government that was hammered in March regional elections.
Not since 1969 has the venerable 204-year-old Bank of France dipped into its stock, which the bank says sleeps in a vault nicknamed “The Subterranean” under its headquarters in central Paris.
There, the ingots earn nothing. Sarkozy reportedly says money raised from selling gold could be invested, and the interest used to reduce France’s debt or finance its future.
“Is there any parliamentarian here who considers it natural and normal that these reserves produce no revenue whatsoever?” Sarkozy reportedly said Wednesday in parliament.
French hands are to some extent tied by a March agreement between European banks, including France’s, aimed at ensuring that they don’t destabilize the gold market by all selling at once. The European Central Bank and 14 national central banks agreed that their combined gold sales will not exceed 500 tons a year over the next five years, starting in September.
But Sarkozy reportedly told parliament that the European Central Bank has authorized France to sell 500 tons—about one-sixth of its hoard—over five years. That could earn 5 billion euros ($5.95 billion) which, when invested, would generate 200 million euros ($238 million) “where now we have none,” said the finance minister.
“Given France’s budgetary situation, I would rather be on the side of the person who brings in 200 million euros in supplementary revenue without cheaply selling anything than on the side of those who dug the holes and emptied the coffers,” he reportedly argued, shouting down critics who accuse of him of pawning France’s wealth.
Other European countries, including Italy, could follow suit if France sells, analysts told the AP. Switzerland and the Netherlands have already been selling. The central Bundesbank in Germany, which has the world’s second biggest holding, also is contemplating selling gold and has the option to sell up to 600 tons over five years under the March agreement.
The United States, by far the world’s biggest gold holder with more than 8,100 tons, has not given any indication that it plans to sell, the AP reports.
Now is considered by many to be a good time. Gold prices have hit 15-year highs this year and the metal traded at close to $400 per troy ounce on world markets Thursday.
“It’s an exodus. Gold doesn’t have many official friends,” Andy Smith, an analyst with Mitsui Global Precious Metals in London, told the AP. “This is a metal that’s been subsidized for generations by taxpayers, keeping it in vaults off the market. It is coming to an end.”
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