Gold Prices Are Soaring In Venezuela

Authored by Frank Holmes via SafeHaven.com,

Last month in Venezuela’s capital city of Caracas, a cup of coffee would have set you back 2 million bolivars. That’s up from only 2,300 bolivars 12 months ago, meaning the price of a cup of joe has jumped nearly 87,000 percent, according to Bloomberg’s Café Con Leche Index. And you thought Starbucks was expensive.

But that was July. Prices in Venezuela are doubling roughly every 18 days. The International Monetary Fund (IMF) now projects inflation to hit an astronomical 1 million percent by the end of this year. This puts the beleaguered Latin American country on the same slippery path as Zimbabwe a decade ago and Germany in the 1920s, when a wheelbarrow full of marks was barely enough to get you a loaf of bread.

Venezuela’s socialist president Nicolas Maduro—who only this past weekend survived an assassination attempt involving several explosive-laden drones—announced recently that the country plans to rein in hyperinflation by lopping off five zeroes from its currency. If you recall, Zimbabwe similarly tried to combat soaring prices of its own by issuing a cartoonish $100 trillion banknote—which in 2009 was still not enough to buy a bus ticket in the capital of Harare.

Without structural governmental reforms, a new bolivar is just as unlikely to steady Venezuela’s skyrocketing inflation or remedy its crumbling economy.

Gold Could Save Your Life

So where does this put gold? At some point, hyperinflation gets so ludicrously out of control that discussing exchange rates becomes pointless. But as of July 30, an ounce of the yellow metal would have gone for 211 million bolivars—an increase of more than 3.1 million percent from just the beginning of the year.

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My point in bringing this up is to reinforce the importance of gold’s Fear Trade, which says that demand for the yellow metal rises when inflation threatens to destroy a nation’s currency—as it’s doing right now in Venezuela. A Venezuelan family that had the prudence to store some of its wealth in gold would be in a much better position today to survive or escape President Maduro’s corrupt, far-left regime.

In extreme cases like this, gold could literally help save lives.

Such was the case following the fall of Saigon in 1975. If not for gold, many South Vietnamese families might not have managed to escape the country. A seat on one of the thousands of fleeing boats reportedly went for eight or 10 taels of gold per adult, four or five taels per child. (A tael is slightly more than an ounce.) Gold was their passport. Thanks to the precious metal, tens of thousands of Vietnamese “boat people,” as they’re now known, were able to start new lives in the U.S., Canada, Australia and other developed countries.

Venezuela’s Once Prosperous Economy Destroyed by Corruption and Mismanagement

But back to Venezuela. Amid the corruption and mismanagement, the only thing helping the country pay its bills right now is gold. Two years ago, it had the world’s 16th largest gold reserves. Today it stands at number 26 as it’s sold off more than half its holdings since 2010. While countries such as China and Russia continue to add to their holdings, Venezuela has been the world’s largest seller of gold for the past two years.

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It’s hard to remember now, but as recently as 2001, Venezuela was the most prosperous country in all of South America. Like Zimbabwe, the OPEC nation is rich in natural resources, home to the world’s largest oil reserves and what’s believed to be the fourth largest gold mine. Oil exports account for virtually all of its export revenue.

In 2016, Venezuela was the third largest exporter of crude to the U.S. following Canada and Saudi Arabia, but with output in freefall, this is changing rapidly. For the first time ever in February, Colombia sold more crude oil to the U.S. than its eastern neighbor did. And in June, Venezuela’s state-owned oil and gas company, Petróleos de Venezuela (PDVSA), informed at least eight foreign clients that it would be unable to meet supply commitments. According to GlobalData, production is on track to fall to only 1 million barrels per day by 2019, down from 3 million a day in 2011, meaning the petrostate might soon have nothing left to deliver.

President Maduro now has the ignoble distinction of reigning over an economic recession that rivals the very worst in modern history. Last month, the IMF forecast that the country’s real gross domestic product (GDP) would fall 18 percent this year—the third straight year of double-digit declines.

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A mass exodus of young, working-age Venezuelans, many of them college-educated, is unlikely to help. Estimates of the number of people who have fled the country in the past two years alone range from 1.7 million to as high as 4 million.

Their escape is no easy task, as numerous international airlines, citing rampant crime and a lack of electricity, have canceled all flights in and out of Caracas. The only U.S. carrier still operating in the country is American Airlines, which offers a single daily flight from the nation’s capital to Miami. Just two years ago, there were as many as 40 nonstop American flights, not to mention those of rival carriers, between the two cities—a sign of just how dramatic and swift Maduro’s mismanagement has been in crippling Venezuela’s once-robust economy.

The Diversification Benefits of Gold

The gold bears were on top last week, with the metal trading as low as $1,205 on Thursday. That’s the closest it’s come to dipping below $1,200 since February 2017. Friday’s lower-than-expected jobs report gave gold a modest boost, but it wasn’t enough to prevent a fourth straight week of price declines.

In times like this, it’s important to remember that, according to gold’s DNA of volatility, it’s a non-event for the metal to close up or down 1 percent at the end of each session, 2 percent for the 10-day trading period. And guess what? The S&P 500 Index has the same level of volatility.

Ten days ago, gold was trading just under $1,230 an ounce, or 0.6 percent more than today. The math is sound.

It’s also worth remembering that gold has traditionally had a low to negative correlation with other assets such as equities. This is why many investors over the years have used it as a portfolio diversifier.

Case in point: On June 26, Facebook suffered its worst single-day decline since the company went public in 2012. Its stock plunged 19 percent, erasing some $120 billion in market capitalization—the most ever in history for a single trading session.

Gold, meanwhile, held relatively steady, slipping only 0.62 percent.

Comments

nmewn So Close Tue, 08/07/2018 - 20:46 Permalink

Two million Bolivars, for a cup of coffee and they grow the beans...right there. You could almost throw a rock from the center of Caracas and hit the bushes. 

But everybody's sittin around waiting on Maduro's government to SUPPLY the quantity of coffee it would take to drive coffee prices DOWN...or...unwilling to PRODUCE the coffee and be paid in a steadily devaluing Venezuelan Bolivar.

So many lessons ;-)

In reply to by So Close

nmewn superyankee Wed, 08/08/2018 - 07:04 Permalink

I just happened to notice you didn't make that outstanding offer of 1/10,000th of a penny an hour to lock-stick, that would have been an actual pay increase for him...lol. So why u hatin on the lock-stick and keeping him held down under your thumb? 

He's got a entire family of botz to feed, think of his little botz ;-)

In reply to by superyankee

Kokito So Close Wed, 08/08/2018 - 06:12 Permalink

You should get a brain transplant.

Holmes is using IMF propaganda to spread his right-wing political agenda of doom and gloom against the Venezuela socialist revolution feeding into the paranoia & propaganda that the (((presstitutes))) have instilled in the minds of the unsuspected meee about Venezuela. He forgot to mention that in May 2007, Chavez broke ties with the IMF & the WB & now Venezuela is paying for that decision.

Venezuela has the fourth largest Gold mine in the world & is increasing its annual production considerable with 9.1 tons acquired in the first half of 2018 Venezuela is on the same pace as Russia which has been acquiring approximately 20 tons per annum for the past several years.

Gold Reserveshttps://www.ceicdata.com/en/indicator/venezuela/gold-reserves
Venezuela ^6,253.00 (Mar 2018)
Brazil (2,709.00) (Jun 2018)
Colombia (518.90) (Jun 2018)
Chile (9.90) (Jun 2018)
Argentina (2,486.44) (Jun 2018)
Ukraine (985.51) (Jun 2018)

The only things that Colombia is good at it, is in coca production, drug, arms & human trafficking, assassinations of its own people and foreign leaders (world’s top coca producer)

Venezuela Crude Oil Production - updated on Augost of 2018.

Actual      Previous    Highest   Lowest     Dates            Unit      Frequency
1531.00 | 1533.00 | 3453.00 | 594.00 | 1973-2018 | BBL/D/1K|Monthly

Colombia Crude Oil Production - updated on Augost of 2018.
865.00   | 769.00   | 1035.00  | 356.00 | 1994-2018 | BBL/D/1K |Monthly

https://tradingeconomics.com/venezuela/crude-oil-production

Holmes makes its money by spreading doom and gloom about Venezuela to make his sales pitch (propaganda) about Gold as a safe heaven & of course he wants you to buy gold through his investment shell but what he forgot to mention is that there are both advantages and disadvantages to every investment (propaganda) and Tyler Durden (who ever you are), you are a dumb Mother Fuc…er & a stupid shit. Go fuck yourself.

In reply to by So Close

JBL Tue, 08/07/2018 - 20:40 Permalink

what kind of retard thinks they can pay for stuff in gold in SHTF scenarios? especially in Venezuela? if random peeps found out you had gold, they'd pull a gun & just take it from you.

 

what next? pay brazilian and colombian hookers & their pimp w gold? 

JBL ATM Tue, 08/07/2018 - 21:29 Permalink

actually, plenty of peeps did that. zimbabwe & the weimar republic to name a couple

they packed em in wheelbarrows to the supermarket. plenty of pics & evidence

 

on the contrary, can u name some examples of gold saving the middle class in some shithole somewhere?

take your time...I'll wait

In reply to by ATM

JBL DisorderlyConduct Tue, 08/07/2018 - 23:03 Permalink

i dont have a prize sadly... :( only sum food for thought

 

u ever get the feeling as a consequence, many of these crisis' are deliberately engineered to prop up equities & muni bonds in the states? while it is true the US left their southern vietnamese political allies standing there w their dix in their hands, many of the corporate & high lvl military/political personnel were granted US citizenship & moved their families over the america. this happens almost everywhere! the Philippines, the school of americas in Latin America, colonels & higher ranking staff are invited to send their kids to ivy league institutions, steal as much money out of those shitholes to buy real estate, stocks, bonds & minority shares here.

 

when the USSR collapsed, we see increased russian organized crime operating here in the us. same w Albanian human traffickers, Cuban drug lords. its almost like oligarchs & criminals are encouraged to steal as much as they can from their own countries and move it here...

In reply to by DisorderlyConduct

JBL Toonces McGraw Tue, 08/07/2018 - 21:27 Permalink

+1

actually when i was little, i saw the first wave of vietnamese refugees arrive in australia. i dont think it was gold that allowed them into our country, but rather the generosity & surplus value our economy afforded to greet them w open arms. (although there were quotas & once the limit was reached? no amount of gold were refugees allowed into Oz)

 

my point is im sick of these libertarian gold peddlers who try to sell this fantasy of if the lower/middle class owns gold, then it will save em from a SHTF event. that utopia has never occurred in human history. not in rome, delphi, athens, spain, britain, ireland, south africa, iceland, the soviet union, cambodia, and it wont save venezuela or mexico, nor did it save Libya or iraq

 

to be realistic, what happens is pretty much everyone below upper middle class gets screwed b/c they do not have the means to leave their locality. its very rare for someone of a lower social strata to escape unless they were extremely lucky. in nearly every societal collapse, people end up hiding or burying their gold and do not spend it until a stable marketplace is reestablished. barter replaces credit, bills, coins, notes & bimetallic fiat. stop allowing these goldbugs to lie to you reinforcing a false sense of security. i say this as a holder of precious metals and numismatics

 

sry folks. its just history. >.<

read enough of it and you'll notice the same patterns

In reply to by Toonces McGraw

Montana Cowboy JBL Tue, 08/07/2018 - 22:32 Permalink

For several years on ZH, I have been trying to drive this sense into the believers at the Church of Gold and Silver. If they would only deploy some real critical thinking, they would realize they are very deep in the sewer of belief. As deep as allahu akbar with the fan belt on his head.

I ask only one question that none of the gurus will answer. If metals really have been down-rigged to fire-sale prices for decades, why is there any inventory left?

In order to explain this, bullshit artists like Rob Kirby claim that physical gold in large lots sell at 200% of Comex. And that silver longs are secretly being paid off under the table not to call for delivery. Both are total bullshit. Why would anyone pay even 1% over Comex when they can just buy contracts and call for delivery at 100%? I know the standard answer: Comex has no gold. So what? Comex has no coffee, wheat, corn or anything else. Comex arranges for delivery, they don't make delivery.

And I have never really heard a guru inform his audience that every Comex position is both a long and a short. The trader just decides which card to play first to open and which one to play last to close. All the uninformed believers actually think it is possible to just go short and never undo that market influence with a long.

Then there is another concept that believers got really wrong. A contract is really an exchange contract. Take a USD/gold contract. You could say both parties are long. One is long USD and the other is long gold. Or they are vice versa both short. Most of the shorts, which have a negative influence on price, are bullion banks that really do have the metal. Most of the longs, which have a positive influence on price, are in on margin only. THE LONGS DON'T HAVE THE CASH TO CALL FOR DELIVERY AND THE SHORTS KNOW IT. That is why the longs get their brains beat in. So who is really rigging the markets? You can make a much better case that longs with no cash are up-rigging the price far more than shorts with no metal are down-rigging the price. If all parties to all gold contracts were forced to perform instead of cash settle, the shorts would mostly perform while the longs would be lined up at the bankruptcy courts. The price of gold has been up-rigged for years.

But nobody has any economic interest in bringing you this side of the story. Consequently, those high priests at The Church of Gold and Silver can tell stories beyond fantasy and there is nobody there to oppose them.

In reply to by JBL

Montana Cowboy fbazzrea Tue, 08/07/2018 - 23:12 Permalink

First, you will need to explain your position because I don't believe you simply don't have time while you surf ZH. Actually, I doubt very much you can make a counter argument without barfing up all the bullshit you heard in church.

When you got 30 years of ACTUAL COMEX TRADING under your belt like I do, maybe I'll listen to you. Until then, please keep going long. We refer to those suckers as "new money" up for grabs.

In reply to by fbazzrea

Montana Cowboy blueseas Wed, 08/08/2018 - 16:30 Permalink

I do know this: There has NEVER been a delivery default despite the alleged inevitability of such events over decades of preaching by the Church of Gold and Silver. You are wrong-footed on who has the burden of proof here. I'm not preaching anything. I am just citing the total absence of evidence for anything that comes from the high priests.

In reply to by blueseas

Cloud9.5 JBL Tue, 08/07/2018 - 22:23 Permalink

You need to read up on what happens when money dies.  This is a good place to start.  https://ferfal.blogspot.com

When systems die, black markets flourish.  A barter economy evolves.  Something has to draw goods to the market.  Gold is one of those things.  What you discover is that bits of gold chain will buy a loaf of bread.  Ferfal suggests that you buy yourself a good high capacity automatic pistol and a vest.

Zimbabwean hyperinflation sparked a gold rush.

https://www.youtube.com/watch?v=_eSwahtgszM

 

 

In reply to by JBL