Hugo Chavez' decision to recall Venezuela's gold reserves and nationalize the industry could reflect his paranoia about being hit with financial sanctions, analysts said.
Chavez and other officials in his administration claimed on Wednesday that the move to recall about $11 billion in reserves stored in U.S. and European banks was being done to protect the country from economic troubles in the developed world.
Central Bank of Venezuela President Nelson Merentes said the government wants that gold in its vaults during "the time of these disturbances."
But George Gero, a financial adviser with RBC Wealth Management, said Chavez is effectively moving the assets out of countries "that he considers could freeze his gold."
The United States and its allies have their sanctions arsenal trained almost exclusively on the Middle East and North Africa at present -- the latest set of U.S. financial sanctions was announced Thursday and aimed at Syria.
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To me, this shift will trigger other nations to gather their physical assets and keep them close, rather than spread out across the globe. I also think that this will lead to a return to a gold standard when fiat money collapses.
A few days ago we penned "As Chavez Pulls Venezuela's Gold From JP Morgan, Is The Great Scramble For Physical Starting?" in which, logically, we wondered if the unwind of the great gold cartel, whose purported price manipulation has always resided in the domain of paper, or confidence-based, precious metals, may have started from the most unexpected source: Venezuelan dictator Hugo Chavez who just announced that he will not only nationalize the country's gold industry but reclaim his physical gold (however much of it may exist) from custodians such as JP Morgan and Bank of Nova Scotia. The practical implications of this move are substantial- since then gold has seen record high after record high. Whether one attributes these moves to Chavez, or to yet another global "risk-flaring" episode is unclear. Luckily, Grant Williams, author of the always entertaining "Things That Make you Go Hmmmm", provides some very fascinating observations on this very interesting topic...More
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