The European Commission itself suggested in a recent Green Paper on Stability Bonds that were Europe to move towards fiscal integration and issue a common euro bond, the credit quality of that bond could be enhanced by collateralizing it with gold.
This provides benefits at many levels. It could provide an alternative, economical solution to more effectively provide financing solutions to eurozone members under economic stress. It would enhance the face value; credibility and backing of the bond issuer. Lastly, by increasing the collateral base with gold, it would reduce the risk of the bond holder and therefore a much lower yield or interest rate would be required.
Within an appropriate structure, a gold-backed bond could be a credible and attractive proposal which could reduce sovereign borrowing costs to sustainable levels. This only serves to reaffirm gold's credentials as a unique and highly compelling reserve asset.
