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re: time to get ready for gold boom Tuesday August 22, 4:42 PM
Bundesbank rules out gold sales to fill budget gaps
Bundesbank President Axel Weber ruled out the use of Germany's huge gold reserves to help fill the gaps in federal budget.

Asked by the mass-circulation daily Bild whether the German central bank could simply sell some of its gold to plug the gaping holes in the budget that the government wants to fill by means of an increase in valued-added tax (VAT), Weber replied: "You can't be serious.

"Such one-off measure are never a good idea," the Bundesbank chief said. "Drawng on capital is not an alternative. It is better to press ahead with consistent debt reduction.

Germany has 3,428 tonnes of gold, worth an estimated 69.5 billion dollars at current market prices, making it the second largest holder of gold reserves in the world.

The issue of what to do with such massive reserves have frequently led to tensions between the government and the Bundesbank in the past, with politicians calling for the sale of some of the gold, particularly in view of the rise in the gold price.

But the German central bank has long opposed such requests, not least because a sale could be seen as a sign that it is vulnerable to political pressure.

Weber told the Bild that the Bundesbank was not opposed in principle to a sale of some of the gold.

"I could imagine shifting some of our reserves from gold into foreign currency. But we don't want to tap into Germany's currency reserves," he said.

"Gold is part of Germany's currency reserves, of which we are the guardian. They are an important factor behind confidence in the stability of the euro," Weber said.