Venezuelan President Hugo Chavez ordered his government to repatriate $11 billion in gold held in banks abroad to safeguard the country from the economic crisis and said he’ll nationalize the local gold industry.
Venezuela has about 211 tons of its 365 tons of gold reserves held abroad at institutions including the Bank of England, JPMorgan Chase & Co. (JPM), Barclays Plc (BARC), Standard Chartered Plc (STAN) and the Bank of Nova Scotia (BNS), according to a government document.
“We’ve held 99 tons of gold at the Bank of England since 1980. I agree with bringing that home,” Chavez said today on state television. “It’s a healthy decision.”
So how exactly can the Venezuelan government move 211 tons of gold from England to Venezuela? On a plane? Or a series of planes? Who would insure such a risk, since stolen gold is virtually untraceable?
My suggestion is to sell the gold in England, and then buy gold at the central bank in Venezuela. Let the market run an arbitrage operation between England and Venezuela. Sure, you are going to pay a premium, so you will not manage to buy 211 tons of gold for the same price that you sold it in England. But perhaps you can successfully repurchase the gold at only a 3-5% premium.