Ben Bernanke may continue to believe that gold is not money

The gold price slipped slightly lower Tuesday, trading off $6.00 at $1,788 per ounce heading into the opening bell on Wall Street. The price of gold has been boosted by concerns that rising Italian bond yields will lead to the ousting of Prime Minister Berlusconi. Safe haven flows have helped drive gold prices back near $1,800 per ounce. S&P 500 stock futures moved higher, gaining 6.00 to 1263.50 ahead of a vote on Berlusconi’s budget.

While Federal Reserve Chairman Ben Bernanke may continue to believe that gold is not money, senior government officials from around the world apparently disagree. Over the weekend German newspapers reported that policymakers at the G20 summit in France discussed the idea of having the German central bank sell a portion of its gold reserves to fortify the European Financial Stability Facility (EFSF). However, senior German officials quickly refuted the plan. Economy Minister Philipp Roesler was quoted as saying that Germany’s gold reserves “remain untouchable.”

Commenting on the developments, analysts at Scotia Capital wrote in a note to clients that “The week ahead looks positive for the price of gold…Political instability in Italy and Greece brought back European debt worries that sent gold up over 1% to $1,745/oz. Almost immediately after George Papandreou stepped down as prime minister of Greece, word spread of Italian Prime Minister Silvio Berlusconi being pressured to step down from his post as the contagion pushed Italy’s borrowing costs to modern day records.”

“The general sentiment among investors and the general public seems to be that the European debt woes will get worse before they get better,” Scotia Capital added, “a factor that bodes well for the price of gold for the balance of 2011 and 2012.”

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