Venezuela's Gold Liquidation Begins: Maduro Quietly Exports 36 Tonnes Of Gold To Switzerland

Tyler Durden's picture

Two weeks ago, shortly before noting that Venezuela's CDS is now at the same level where Greece was 3 months before its default, we wrote that as a result of a recently implemented gold swap with Deutsche Bank, Venezuela was preparing to liquidate its remaining gold holdings (ostensibly temporarily, if only on paper) in order to pay down its upcoming debt maturities.

As it turns out Venezuela has already started moving much of its gold reserve to Europe where it will be located closer to swap-provider and ultimate custodian, and liquidator, Deutsche Bank, by way of Switzerland. According to BullionStar, Switzerland has imported a net of 35.8 tonnes of gold from Venezuela in January 2016.

And so, the gold which deceased Venezuela leade Hugo Chavez so painstakingly tried to collect from Europe, is just a few short years later, about to make its way back to where it came from.

More from BullionStar's Koos Jansen

Venezuela Exported 36t Of Its Official Gold Reserves To Switzerland In January

This unusual high tonnage must be gold from the central bank of Venezuela – Banco Central de Venezuela (BCV) – that has been swapping metal with banks or simply sold it in the open market. Remarkably, after Venezuela repatriated 160 tonnes in official gold reserves from 25 November 2011 until 30 January 2012, it started to slowly export this gold to the world’s largest gold trading and refining hub, Switzerland, in 2015. How much unencumbered official gold reserves Venezuela has left is unknown.

Venezuela’s economy is in dire straits. Adding to failing economic policy by the government the country gets nearly all of its export revenue from oil, of which the price has declined roughly 70 % since 2014. Venezuela’s foreign exchange reserves are dwindling fast, from $24.2 billion dollars in February 2015 to $14.8 billion dollars in November 2015, while Inflation is said to be triple-digit and Credit Default Swap (CDS) data shows that traders see a 78 % chance on default, according Reuters. In an effort to avoid catastrophes the BCV has a very strong motive to employ its official gold reserves.

The 35.8 tonnes of gold in question that arrived in Switzerland in January 2016 must be sourced from the vaults of BCV in Caracas, because Venezuela has no significant gold mine output, according to the US Geological Survey its annual production stands at approximately 12 tonnes, and its citizenry is unable to sell such tonnages. If we look at historic cross-border trade we find that gold export from Venezuela to Switzerland commenced in 2012 with 4 tonnes, followed by 10 tonnes in 2013, 12 tonnes in 2014 and 24 tonnes in 2015. It’s possible the shipments in 2012, 2013 and 2014 were largely sourced from Venezuela’s mine output, but it’s impossible the shipments in 2015 and 2016 were not sourced from the BCV.

From the data provided by Switzerland’s customs department we can estimate the purity of the gold traded by using the average monthly gold price and subsequently compare the weight to the value disclosed in the reports. In the chart below we can see that until May 2013 the gold Venezuela was exporting to Switzerland was roughly 80 % pure, this could have been for example doré bars from mines or coin bars from the BCV, while starting from December 2013 the shipments were roughly 99.5 % pure, suggesting the gold came predominantly from BCV in London Good Delivery bars or US Assay office bars.

Switzerland gold import venezuela

Chart 1. Non-monetary gold import Switzerland from Venezuela, the purities are estimates.

 

* * *

Reuters wrote Venezuela’s gold involved in swaps does not enter the market. I beg to differ. Normally, in a swap the gold is sold spot from the client to the dealer in exchange for dollars, while both parties agree to reverse the purchase at a future date at a fixed price. If the gold is physically moved during the swap depends on several factors. Because Venezuela had repatriated 160 tonnes of gold in 2011/2012 this metal left the London Bullion Market Association’s chain of integrity. Hence, Gutierrez stated no bank is going to take gold collateral that’s held in Caracas. When BCV’s 50 tonnes stored in London were already on swap with Citibank, it was forced to bring gold to the bullion banks when it needed additional dollars. The gold moving to Switzerland is an example.

It’s not possible to trace exactly how much gold BCV has exported for swap deals, or potentially sales, through foreign trade statistics. Official gold reserves are monetary gold, which is exempt from being disclosed in foreign trade statistics (click this link for a detailed analysis on how monetary and non-monetary gold transfers are recorded in foreign trade statistics and in balance of payments around the world). Whenever BCV chooses to ship any of its gold abroad, for swaps or sales, there are two options with respect to foreign trade statistics, (i) the monetary gold is exported abroad, or (ii) the monetary gold is demonetized in Venezuela and exported abroad. Only in the latter option the gold would show up in foreign trade statistics, as such data solely records movements in non-monetary gold. For all clarity, gold can leave the London Bullion Market Association’s chain of integrity although still being monetary gold, these are separated classifications.

From all sources and evidence presented above actually I think both options are explored. We can clearly see demonetized gold going to Switzerland, but there are also hints monetary gold is exported abroad. Foreign trade statistics by the UK, Switzerland and Hong Kong – the major gold trading hubs – have not shown any gold import from Venezuela reflecting BCV’s declining reserves in March and April 2015 or export in July 2015, meaning Venezuela had probably exported metal invisibly as monetary gold. Needless to say, if BCV would sell any of its gold reserves directly to a fellow central bank, for example the People’s Bank Of China, the related shipments would never show up in foreign trade statistics.

From all information at my disposal I cannot conclude how much gold BCV has on swap or unencumbered in the vaults in Caracas. Surely, Venezuela its official gold reserves are not as much as the World Gold Council portraits. According to the Council BCV still holds 361 as of Q4 2015, though the balance sheet at the BCV website from November 2015 states “Oro monetario 69,147,656,000”, which is worth $11 billion US dollars at an official exchange rate of 0.16, and roughly 296 tonnes of gold at a nine months rolling average gold price of $1,152.68 an ounce (which is how BCV gold is valued, pointed out by Manly). The 296 tonnes will not be fully unencumbered as bullion banks offer swaps while the gold remains on the client’s balance sheets (/double counting).

Obviously Venezuela is in a tight spot. The country is trying desperately to survive on its last reserves and the bullion banks seem to offer shark deals. How long this can go on is anyone’s guess.

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blabam's picture

Thanks for playing, chump.

NoDebt's picture

Not sure which "ton" they use to measure gold in but I'd say one "ton" of gold is worth about $35MM at today's prices.  Which would mean 36 "tons" of gold would be worth about $1.25 billion.  Drop in the bucket compared to what they owe.  But worth a huge amount if the currency system collapses.

tmosley's picture

(((Deutsche Bank)))

Huh.

DownWithYogaPants's picture

Douche Bank.  Only they are what is getting cleaned out.

wee-weed up's picture

Ha! Chavez brought it home...

And Maduro sends it back!

Save_America1st's picture

to Switzerland....where it will be promptly melted down and refined into fat stacks of nice and shiny 5 9's Chinese kilo-bars and shipped to China never to be seen again....bitchez...

Pairadimes's picture

Soon to be followed by Maduro exporting himself to Switzerland.

Tejano's picture

36 tonnes. It would take only a lttle over two days for all of it to be withdrawn from the SGE.

.

zeronetwork's picture

And seeking asylum there. Heck with Venezuela .

new game's picture

which ship? is this in the baltic dry index? airplane?

Kirk2NCC1701's picture

Maduro?  I thought it was 'Madburro' (c)2016 -Kirk

Kirk2NCC1701's picture

DB, why all the fuss over and ancient relic that has no ROI, and costs money to store?

Hey, wait wait a minute, that sounds just like a NIRP account!

FreeMoney's picture

Funny how Douche Bank seems to know what a barbaric relic is worth, and takes possession.

City_Of_Champyinz's picture

Indeed, the numbers do not really matter.  This is nothing more than the inevitable result of a formerly prosperous nation embracing Socialism, bankruptcy always follows.

Reichstag Fire Dept.'s picture

I'm certain they would use the Metric Tonne when dealing in Switzerland. I used to buy raw mine production from producing mines and it sounds like Venezuela is holding unrefined mine production. 80% Au/16%Ag 3% Cu is most like likely the bars composition.

Nevertheless, the "tonnage" is beside the point with raw production...raw mine production does not become a fine gold "barbarous relic" until refined and it's .9999 purity confirmed, Hallmarked and able to be weighed in fine form. There will no doubt be assay fees per bulk lot. Most gold refineries are running at capacity right now so there is probably going to be a wait time involved. Hence all the heavy refining and barring fees.

Gold doesn't refine itself, it takes an enormous amount of energy.

NoDebt's picture

OK, I'll buy that argument.  I was just doing some rough finger math to get in the ballpark of the value of that much gold.

orez65's picture

" Drop in the bucket compared to what they owe"

Please, don't be so naive!

The proceeds of the gold that is being cashed will go to Maduro and his gang.

It is being gradually stolen!!

NoDebt's picture

Oh, absolutely.  No argument there.  Maduro is going to end up in a running gun battle to catch a private plane out of the country sometime in the near future.  But he's gotta get the money out of the country first or life in exile won't be much fun.

FYI- Naive isn't a word I've been called in a long time.  It's both refreshing and insulting all at the same time.

Kirk2NCC1701's picture

"Gold is backed by the same 2 things as fiat: FAITH & GUNS. The less you have of one, the more you need the other" -Kirk

Here all week. Try the Salad Bar.

Sir SpeaksALot's picture

money of the last resort...

salvadordaly's picture

A lot to do about a worthless metal relic

Fed Flintstone's picture

Yeah those worthless metal Relics, You can dig them up everywhere..

Two Theives and a Liar's picture

The natural end result of socialism...

going broke...1 oz at a time.

God help those poor fools.

unplugged's picture

and now its on its way to china

2ndamendment's picture

You mean the socialist utopia of Venezuela is in trouble? You paying attention, Bernie? 

sleigher's picture

"They aren't doing it right.  It will be different when we do it."  

Pretty sure I heard Bernie say something like that. 

City_Of_Champyinz's picture

Not just Bernie, every Socialist in world history who has not had his chance yet to implement his brand of Socialism that will work this time...

knukles's picture

Nah.  Can't happen here because We're Exceptional

Sanders Cornhole/2016

Reichstag Fire Dept.'s picture

Socialists like Bernie Sanders are so simple as to think that they can simply change the tax code, turn the "rich" people upside down and commence shaking their tax out.

It never crosses their mind that the "rich" people will react and change up their plans...or *gasp* leave the country!

I've got one foot out the door now from Canada...you Americans think Bernie is bad...try our Drama Teacher, Justin Trudeau! :(

zeronetwork's picture

Obama was hopenchange, Bernie is smokenmirror.

StychoKiller's picture

Definitely smokin' something!

Not My Real Name's picture

What? Where are all of the socialist apologists and closet socilaists who have infiltrated ZH lately? There isn't a single statist out there who feels like explaining why it wasn't guys like Chavez, Castro, and all of the others fault that their socilaist utopias failed?

Anyone? Bueller?

AC_Doctor's picture

Who would have thought that the Socialist asshole Maduro would keep the COMEX shit show going for another couple of months with his forced phyzz liquidations.

Hell, China will vacuum up those measley 34 tons in a month.  Wait until India goes on there buying spree starting in March.

 

Socialism=FSA- FREE SHIT ARMY

wstrub's picture

Why wouldn't they sell it to their own people?  What will they get in exchange??????

NoDebt's picture

You know, that's actually a damned good question.  Somewhere in all of Venezuela I'm sure there would be plenty of citizens who could scrape together what I calculate to be about $1.25 billion worth of cash at today-current gold pricing.  The government would have their needed cash and at least the gold would stay in the country (so they could confiscate it and run the scam all over again a few years later).  

 

Benjamin123's picture

What difference does it make? A buyer is a buyer.

Fed Flintstone's picture

Time for the Venezualen Gov to Pillage the National Museums...  They have a bunch of Gold and Interesting Relics

Fed Flintstone's picture

Time for the Venezualen Gov to Pillage the National Museums...  They have a bunch of Gold and Interesting Relics

Reichstag Fire Dept.'s picture

Canada sold half of it's paltry remaining reserves the last time the gold price rallied like it did today...kinda makes you say, hmmmmmmm....

Feb. 10th I believe...

oklaboy's picture

ND, how long till maduro meets his gold in Switzerland? me thinks "out of the country" should ring a bell.

Urban Redneck's picture

If they sell it to their own people, they only contribute to the vicious cycle. They need in-FLOW of foreign currencies. If the effectively withdraw foreign currency from the local grey/black market by selling gold into it, then the black market rate on the their local fiat goes to shit even more.

The simple fact is that Maduro is a traitor - to a his people, his country, and his cause. Trading gold for fiat is a fool's errand when you're running a country that doesn't mine gold, but does produce oil. For parting with his gold he will get about 3/4 of the fiat of an average days oil sales per ton of gold he parts with (and I'm using $20/barrel).

flaunt's picture

I didn't see anything explicitly from Venezuela saying they intend to liquidate this gold.  Maybe Maduro has a personal Swiss vault he's transferring "the people's" gold to..

css1971's picture

If you don't physically have it. You don't have it.

Duh.

overmedicatedundersexed's picture

Norway is not feeling good right about now...they at least invested the oil income, while keeping the socialist dream alive..gotta wonder how much vig the banks and .gov officials have drained off that fund?? as in a lock box like al gore kept for us serfs in usa ..you know the social sec lock box...oh wait.

rahtidmon's picture

And then you have thriving Iceland? THEY did perpwalks!! They fixed their banks, broke em up, etc

Now they are hawking for your money, by actually paying interest on deposits. May not be insured, but...

LOL

What's in YOUR bank?

 

Sages wife's picture

I wonder if they shipped it by boat.

roadhazard's picture

I was wondering if it got frequent flier miles.

knukles's picture

I was wondering if what gets shipped to DB winds up being salted bars, wolfram, tungsten, W, 74, you know?
Disappears along with the stuff from Ukraine.
Anybody heard where that shit got off to?  Me neither.

How the fuck is it that a country's entire gold reserves can be lifted in the middle of the night by robbers in plain sight and nobody, I mean nobody, is asking Jack Shit about it?
Huh?
WILL SOMEBODY PLEASE EXPLAIN THIS TO ME!!!!!!!!!

AAARARARRARRARARAAAGGAGGAGGHHHH