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Members of Angela Merkel’s CDU party, as well as junior coalition partner FDP are suggesting that Spain and Italy should tap into their gold reserves in order to balance their debt issues.

It is clear that they are unhappy with the massive buying of Italian and Spanish bonds by the ECB. There is fear in Germany that these bonds will eventually transferred to the EFSF (bailout fund) – putting the weight on German taxpayers.

Financial Times Deutschaland reports about this. It is quoted here, with one member saying that gold should be used as collateral for the ECB:

Meanwhile, economist Frank Schäffler, the liberal FDP, the junior partner of the German government considered “necessary” for states to sell part of its debt and deposit gold from its reserves in the European Central Bank (ECB) as collateral.

The massive bond buying managed to lower Spanish yields to 5%, a level unseen for a long time. Italy’s yields are not much higher.

The ECB doesn’t necessarily have to transfer the bonds to the EFSF – this doens’t necessarily have to be a transfer union.

It can be QE.

The ECB has rejected quantitative easing – euro printing, even though it will best work in Europe, and not in the US at this time.

EUR/USD is stable in range (1.4220 to 14282). All eyes are not in Europe at the moment, but in the US, awaiting Ben Bernanke and seeking any QE3 – that probably won’t come.

This may be a good time to sell gold. Prices in dollars are above $1700, and also in other currencies, gold is at record highs.

For more coverage on gold and oil, see Trading NRG.

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