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Venezuela reported planning to pawn its gold through Goldman Sachs

Section: Daily Dispatches

1:34p ET Tuesday, November 19, 2013

Dear Friend of GATA and Gold:

The Venezuela newspaper El Nacional, the voice of that tortured country's political opposition, reports today in the story appended here that, after triumphantly repatriating its gold reserves two years ago, Venezuela has sunk so much economically under its predatory socialist regime that it will raise cash by pawning its gold through Goldman Sachs.

That gold almost surely will be delivered by Goldman Sachs to the use of the Western central bank gold price suppression scheme.

Presumably Venezuela's friend China could have bid directly for the gold and apparently didn't, maybe suggesting that China may be glad of the resulting discounting of gold on the international market, especially since the Venezuelan gold well may end up in Beijing anyway after nicekly knocking prices down in its travels.

The translation below, done largely by Google Translator, is far from perfect but may convey the idea well enough.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Venezuela's Central Bank to Trade Gold with Goldman Sachs

By Vera White Crocus
El Nacional, Caracas, Venezuela
Tuesday, November 19, 2013

Venezuela's Central Bank and Goldman Sachs are ready to sign an agreement to swap or exchange international gold reserves, with a start date in October, as stated in the contract, and until October 2020.

... Dispatch continues below ...


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The negotiated amount, equivalent to 1.45 million ounces of gold, are deposited in the Bank of England and the transfers are made directly to Goldman Sachs once delivery times are stipulated.

The operation involves the delivery of gold from the central bank, which will receive dollars from the U.S. firm. The transactions are made through the creation of a financial instrument that is traded in the international market.

During the term of the instrument is an account called "margin," in which the central bank agrees to deposit a larger amount of gold in the event that the price of gold falls or in which Goldman Sachs deposits a larger amount when gold increases. "At the expiration of the transaction the contributions are returned to their owners," the document says.

There will be an adjustment to the asset value of 10 percent, to be used as a hedge in case the international market price falls, indicating that the U.S. bank takes care that if it produces a depreciation it will be covered and Venezuela would assume risk. The annual interest rate will be a combination of dollars with the call BBA Libor equivalent to 8 percent.

The gold dollar instrument is sold in the secondary market that exists for this type of instrument and can be purchased by investors, usually businesses. The idea is to negotiate the instrument to obtain a commission that becomes profitable, depending on the price of the metal.

Any dispute between the parties will be resolved in English courts.

The contract is presented by the representative of the central bank, its President Eudomar Tovar. Gold bullion deposited abroad was placed in the vaults of the central bank in 2011. It is estimated that only 15 percent was outside the country. The projected cost of the transfer was $7 million. The first bullion came from France in the middle of an operation called Patriot Gold, involving more than 500 officers.

On that occasion the then president of the central bank, Nelson Merentes, said that first shipment was part of the 160 tons of gold that would move back to the country in several shipments, which represented 85 percent of the international reserves in bullion held nationwide.

The economist Jose Guerra explains that this operation is being undertaken because of the fall in international reserves. At December 31, 2012, they closed at $29.8 billion and in contrast on Nov. 15 totaled $20.6 billion, a loss of $9.9 billion in 11 months.

"The gold operation aims to give liquidity to the Central Bank of Venezuela when they are in the lower limit since 2004. Just $1.2 billion are liquid at this time and are used to fund 10 days of imports."

Guerra adds that there are needs for payment and to Colombian entrepreneurs, who are paying a portion in bonds, but others did not accept the cash and demand mechanism. We also have to replenish inventories for appliances and other products, and plan to use this new money.

"The Republic ended up taking us into the hands of a Goldman Sachs mortgage by this gold operation."

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