Venezuela to move its Gold out of USA, UK and European banks.

Some of you may have seen this story in the last couple of days, but apparently Hugo Chavez had decided to move most if not all of the country's gold held for central banking purposes back to Venezuelan territory. What I didn't realize until I saw more details on it, is that Venezuela is the 15th largest holder of gold in the world and we are talking about more than 300 tons. Apparently the Bank of England (central bank for the UK) has 99 tons and has already received the request. The rest seems to be held in various bank depositories that are also involved in the CME and other similar markets. No doubt this is going to ruffle a lot of feathers and shake up investors in the status quo. IMO, good for the price of gold.

This is why gold is different.

 

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I wouldn't be keeping my gold in European or N. American banks right now either. My only concern is that Chavez will take the gold and head off to the sun instead of using it for Venezuela.

 

That gold will never again be seen as an asset of Venezuela again is my prediction. That gold will still be around, but will be spent by socialist dictator. As Margaret Thatcher once said, "the only problem with socialism is that eventually you run out of other people's money to spend". Well this is Chavez's "other people's money".

Its sad, but has been played out many times in that area of the world. Famously by the Peron's in Argentina right after WWII. Argentina used to have one the world's largest gold reserves.

Chris

 

Exactly how does one spend 300 tons of gold? Where does it go when he spends it?

Don't forget, Venezuela is an oil exporter in a world starved for oil.

 

Venezuela is an oil exporter with declining production because Chavez is spending every penny generated and not allowing for maintenance, let alone new production. Even at today's oil prices there is simply not enough coming in fro what he is spending.

How do you spend 300 tons of gold? You act like that is a lot of money. Its like 12 billion, right? Chump change for socialist governments in a country with few other resources. It will be wasted like most of his other programs. He has a whole village dedicated to just creating paintings of himself.

 

Depending upon the definition of ton used, (I used metric) I get ~$18B. But this doesn't answer the question of how he would spend this gold. My answer to that is that he can't and for that matter won't. It would have been easier for him to sell while the bars remain at the BoE and other depository banks. The gold would not be moved, the BoE would simply do a currency/gold swap, then Chavez could then just move the proceeds to Switzerland. By moving these bars physically to Venezeula, he has guaranteed this gold isn't going onto the market.

IMO this is his point. That is, it's a move that is made if you think the gold will become more important than the fiat money system and especially the US $. All the countries are doing it, but not this openly and so far (with the exception of China) not to this scale. This is why I say it's a positive sign for the future of gold pricing and gold only. No sovereign government cares about silver.

 

Maybe, but the Peron's and many others simpy sold the gold bars out of their countries depositories over time. It wasn't until they were overthrown and the new government did an audit did anyone find out about the national gold store being gone. That is my view, that he simply will sell the gold over time to finance his spending, and no one will knwo that Venezuela's gold stockpile is gone until he is gone. I have never known a socialist to leave a country with more wealth than he started.

 

Regardless what a person thinks of Hugo Chavez, he is probably making a pretty wise move. The debt issues plaguing Europe right now aren't going away anytime soon, and will likely have some consequences here in the states. The U.S. has over $1 trillion invested in European banks, which coincidentally are the major holders of Europe's debt. The wild swings in stocks and PMs are far from over in my opinion.

 

It is not what Chavez does with the gold right now that is the real issue, it is what happens to it afterwards. As has been noted above Venezuela has been a member, in fact was instrumental in the founding of, OPEC and possesses significant oil reserves. The USA is of course their largest customer. Which makes it sort of fascinating because if the USA really wanted to, well if the USA could anyway, they could boycott Venezuelan oil and tap the strategic reserves, and seriously invest in alternative fuels. But then Chavez can pull the China card and just agree to sell all Venezuelan oil to the Chinese. So Chavez and his sulfurous devil in the USA are inextricably linked and dependent on one another. Chavez sells the oil, but keeps petrol products sold in country at an artificially low price to please the voters - seriously they have the lowest petrol prices of anywhere in the world.

Chavez is a bonafide nutcase, but in some ways he has momentary lapses of stupidity and does something right for awhile, but then fouls it all up in the end. I just fear that their gold reserves will end up in some offshore account for Hugo and his cronies.

 

Different times. Gordon Brown of the UK sold most of the UK's gold in the late 90s. Despite this, he was later elected as Prime Minister. That county is now awash in unsustainable debt where the remedies for it are causing mass riots.

 

I never said either was any better sir, just that my guess, given what I know of South American socialist dictators and Chavez's actions to date, would be that this gold will be sold at some future date and will not stay as an asset to the country of Venezuela. That was my only point.

The gold will still be gold, just in someone else's hands.

 

Except it really does not make much sense. It is enormously expensive to move and maintain 300 tons of gold. As long as this gold was sitting at the Bank of England, Chavez could easily get rid of it and given the way central bankers operate, nobody would even know. Now that it will be sitting in a fortress in Venezuela, selling it is a much more difficult process and one that would be difficult to pull off without notice. Moving this gold is exactly the thing you would not do if you were planning to convert the gold to cash.

IMO, I haven't seen anything that Chavez has done that would warrant the derision that he is getting except to thumb his nose at the USA.

 

First, if he liquidates holdings in London someone may report about the sales. Holding it in Venezuela allows him to sell at his leisure, with no possibility of word leaking out. Many other dictators have withdrawn gold or money from London and world banks over the years. I cannot recall once ever seeing that money or gold as an asset to that country after that act.

If you like what he has done to Venezuela, and has actually read about it, then I don't know what to say. Venezuela was one of the best SA countries, but within our lifetimes will be a banana republic, since all of its wealth is being squandered or stolen by Chavez and his cronies. The oil industry will cease in about 10 years due to him taking all of the profits and refusing to reinvest. Look at Venezuelan oil production over the last five years. I could care less about what he does or feels abotu the US, I simply care about the people of that once prosperous country. I really do feel sorry for them. Mexico is in the same boat with their oil industry, but at least they are close to the US making exports here easier, and have significant foreign remittances to help them.

 

Again this ignores the practical aspects of doing so. The actions of central bankers are not subject to review by their governments. At least not the 1st world ones. Selling this gold in Venezuela means moving this gold back out of that country and in order to do this, it's going to involve many many people who will certainly talk. No buyer will even touch it without insurance in case there is a transport accident.

 

I would say a smart move by Hugo Chavez..................

Now...............will they come up with gold or will they claim, because he is seen a dictator, his assets have been frozen.

Another possibility is the banks don't have it.

This will get interesting..............

 

Yes indeed. This is a most interesting question. Hugo better have his boys standing by with the drill when these bars show up.

 

[QUOTE Chavez is a bonafide nutcase, but in some ways he has momentary lapses of stupidity and does something right for awhile, but then fouls it all up in the end. I just fear that their gold reserves will end up in some offshore account for Hugo and his cronies.[/QUOTE]

Thats what they say about Fidel Castro, but I can guarantee you, if Cuba has any gold, it's in Cuba and belongs to the people. I have been to Cuba a few times, lived among the common folk. Not in a resort but among the people. Fidel cares his people and most love him. He is a genuine man, unlike some of the other 9 US presidents and administrations he has outlived. Just saying............

 

Who cares? ...a perfect example of why a strong defense is more important than a strong monetary policy.

 

Almost anyone planning to buy, sell or hold gold.

 

A Tempest in a Teapot...the Quincy Adams Doctrine (aka, the "Monroe Doctrine") still holds...regardless what the Chinese (or Chavez) may think.