This has been a very active week for precious metals. Gold has hit new highs and is doing well this morning, pushing near the $1250 mark. The flight to safety appears to be due to the still lingering concerns over the Debt Contagion in Europe. Despite the announcement of a massive bailout program, providing a $1 Trillion dollar bandage to nations with sovereign debt problems, market-makers still have the jitters. In addition to gold climbing up, so too has the sale of credit default swaps. Remember those? Yes, CDS sales have been brisk as billions of dollars worth of fresh contracts were written up this week as insurance to Europe going bust!

Leading the way, naturally, are the PIIGS. Italy racked up over $7 Billion in CDS sales, followed by Greece, Spain, and Portugal. Ireland seems to be less of a worry for now, thanks to their ‘Potato Plan’. Perhaps more interesting is that the UK actually nudged out Portugal for 4th place. Some 280 contracts for $2.7 Billion dollars worth of CDS were sold, betting on the United Kingdom to go bust and default. This hardly seems likely as the UK can still print it’s own currency, something the other Euro Zone countries cannot as they are tied to the Euro.

A large number of credit default swaps was also purchased against France this past week. Just over $1.1 Billion was bet that they will suffer as many French banks are heavily invested in PIIGS bonds. Brazil, Mexico and Turkey also saw CDS sales in excess of a billion dollars. Chile came off this week as perhaps the soundest economy on Earth, as only one CDS contract for $2,683,063 was purchased.

More interesting is the fact that a major writer of these new, sovereign debt CDS contracts is none other than our old friend, AIG! Yes, the same company that shorted out the subprime home mortgage industry is now busy selling credit default swaps to those betting that national economies tumble and crash. How lovely! Since us American taxpayers still own 80% of AIG, perhaps this is why the Obama administration and the Federal Reserve are putting U.S. taxpayer money on the table to save Europe? But the truth is the taxpayers lose either way, which makes this whole scheme similar to those Goldman Sachs deals like Abacus and Timber Wolf. So, take my advice and keep buying that physical gold, it’s the only true shelter left for the Common Man.