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Bid to use gold as collateral advances in Europe
By Francesca Freeman
The Wall Street Journal
Wednesday, May 25, 2011
LONDON -- Investors are closer to being able to use gold as a trading security after a European parliamentary committee approved a proposal to allow clearing houses to accept gold as collateral, the World Gold Council said Wednesday.
The European Parliament's Committee on Economic and Monetary Affairs Tuesday agreed unanimously to allow clearing houses to accept gold. The proposal, under the European Market Infrastructure Regulation, will be passed to the European Parliament and the Council of the European Union for another round of voting in July.
Gold's strong price gains in recent years have seen its appeal as collateral increase. Clearing houses and other institutions have looked at introducing new sources of collateral since the financial downturn in 2008 highlighted inadequacies in counterparty risk management in the global over-the-counter market. The G20 said it wanted to try to reduce financial market risks by putting more products into clearing houses, increasing the demand for collateral as security against risks.
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Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit,
Extending the Mineralization of the Southwest Vein on the Property
Company Press Release, October 27, 2010
VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include:
-- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres.
-- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres.
-- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre.
Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface.
"The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest."
For the company's full press release, please visit:
At the same time, many traditional collateral assets, such as European government bonds, have continued to see a deterioration in credit quality as a result of the sovereign-debt crisis.
In October 2009 CME Group Inc. said it would allow physical gold to be used as collateral for margin requirements, a move that was followed by rival Intercontinental Exchange Inc. in late 2010.
In February this year JP Morgan Chase & Co. announced its decision to accept physical gold as collateral in some financial transactions.
"It is very significant that the European Parliament is putting its weight behind the argument that the unique characteristics of gold make it an ideal form of high-quality liquid collateral," said Natalie Dempster, director of government affairs at the World Gold Council.
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Lewis E. Lehrman on How to Solve the U.S. Debt Problem
Lewis E. Lehrman, chairman of the Lehrman Institute, sponsor of The Gold Standard Now project, advises that to reduce the $1 1/2 trillion U.S. deficit, the Republican Party must initiate an investment program.
Working Americans are not saving, which enables the banks to lead the country into a cycle of debt, leverage, boom, panic, and bust.
Lehrman says: "Eliminating the budget deficit of a trillion and a half dollars cannot be done overnight. The proposal by U.S. Rep. Paul Ryan was very dramatic -- one Republican called it radical -- but it was not happily received. The solution, of course, is to design an American program for prosperity, because you can solve these entitlement problems with a growing economy.
"We need a tremendous program of investment, and investment comes from savings. When you pay savers, middle-income professionals and working people, 0 percent at the bank, you are not going to encourage them
to save. Then we are left with a bank cycle of debt, leverage, boom, panic, and bust."
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