Venezuelan President Hugo Chavez ordered the central bank to repatriate $11 billion of gold reserves held in developed nations’ institutions such as the Bank of England as prices for the metal rise to a record.
Venezuela, which holds 211 tons of its 365 tons of gold reserves in U.S., European, Canadian and Swiss banks, will progressively return the bars to its central bank’s vault. “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.”
Many feel that this latest move to repatriate reserves is timed to occur before arbitration case rulings are handed down, in order to avoid a so-called attachment risk that could freeze international assets, according to Boris Segura, a New York-based strategist at Nomura Securities. The repatriation and diversification of reserves may also cloud transparency of government holdings, which would be a negative for the country’s credit, he said.
Of 17 arbitration cases pending against Venezuela in the World Bank’s International Centre for Settlement of Investment Disputes, at least three of them are over mining ventures, including Crystallex International Corp. (KRY), a Canadian gold producer whose Las Cristinas mine was taken over by the government in February. “Today’s announcement is not surprising,” Doug Belander, Gold Reserve president, said yesterday in an interview. “We believe that their objective all along was to take over the entire industry.”
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