Friday, 19 August 2011
Posted by
Admin Hijrah Dinar
Venezuela holds almost 60% of its physical gold reserves in the US, Canada, England and Switerland. Now in an effort to diverisfy its holdings away from US and European financial institutions, Chavez wants to repatriate the precious metal.
“We’ve held 99 tons of gold at the Bank of England since 1980. I agree with bringing that home,” Chavez said yesterday on state television. “It’s a healthy decision.”1
Venezuelans, may in fact, be afraid that much of their gold outside of the country may be at risk. Chavez, in an effort to stop what he refers to as "illegal mining", has siezed the operations of many foreign private mining operations. And if international arbirtation found that these siezures where carried out illegally, Venezuelian assets held abroad could be frozen.
"The government may be moving to repatriate reserves ahead of arbitration case rulings to avoid an “attachment risk” that could freeze international assets, Boris Segura, a New York- based strategist at Nomura Securities said in a research note."1
However this move could have unexpected consequences. Venezuela already has some of the highest borrowing costs of any developed nation. Hording assets and limiting transparency is not going to do anything but raise those costs further.
It is no surprise to most who have seen the socialist president nationalize pretty much everything under the South American sun. Chavez says he plans to move a total 211 tons of Venezuelan gold held in other countries to Caracas.
The move follows a dispute between his government and foreign miners who say the rules limiting the amount of gold that can be exported from the South American nation hurt their efforts to secure financing and create jobs.
Toronto-listed Rusoro (RML.V), owned by Russia's Agapov family, is the only large gold miner operating in Venezuela. It produced 100,000 ounces last year.2
Analysts have said this move will most definitely make gold reserves swell quickly in the country.
"I have here the laws allowing the state to exploit gold and all related activities ... we are going to nationalize the gold and we are going to convert it, among other things, into international reserves because gold continues to increase in value," Chavez said.
Category:
Gold Saving / Investment
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