Corona Virus
Stay Safe, FollowGuidance
Fetching Location Data…
Carlo Alberto De Casa
Facade of the Bank of Italy

The coalition formed by Lega and 5 Stelle is swiftly pushing through hugely costly reforms such a ‘citizenship income’ and a new pension scheme which will see many retiring much earlier than previously allowed.

And with Italy already one of the most heavily indebted countries in the world the key questions is: where are the funds coming from?


While a tax hike could seem the obvious answer, this is likely to prove an unpopular option in a country that already boasts one of the most punishing tax regimes.

So the populist government seems to be mulling an assault on the conspicuous Bankitalia booty. Italy has the 3rd biggest gold reserves in the world, after only the US and Germany.

Italian newspaper La Stampa reported that the government would be considering the option to sell part of its $100 billion dollars worth of gold, which is mostly stored in ingots and coins. These reserves, which amount to 2,451.8 metric tonnes of gold, have been untouched for the last 20 years.

If the government does decide to sell its bullion though it is likely to find multiple barriers.

Rules outlined in the Central Bank Gold Agreement would only allow any potential sales from the last quarter this year, just in time for the next Italian government budget, due in October 2019.

But the government would need to design a legal framework to do so, which requires them to establish who is the legal owner of that gold: is it Bankitalia or the Italian people? This is a grey area within the Italian legal system, which could prove to be the first hiccup.

The government would also need some support from the Bankitalia management and possibly from the ECB, which could, under the ECB statute and various European treaties, oppose such sale.

On top of that, a sale would almost certainly spook financial markets.

Traders would likely interpret this as a distressed signal, clearly marking the controversial direction that this government intends to follow. We would also likely to see some negative reaction in the bond market, with the Italian 10-year-BTP likely to come under pressure.

Italy’s gold is a strong safe haven for the country in Bankitalia’s hand, preventing the country (and marginally the EU) from speculative attacks.

But its sale would be seen by many as an illicit political interference with the independence of the central bank, which, as cited by former Bankitalia governor Salvatore Rossi in 2013, should have the ‘ability to (act) as the ultimate bearer of domestic financial stability.’

By Carlo Alberto De Casa, Chief analyst at ActivTrades

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker

  • Your capital is at risk
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.