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Wednesday
Aug172011

Hugo Chavez Nationalizes Venezuelan Gold Industry, Demands 211 Tons Be Returned From Abroad - JPMorgan, Bank Of England & ETFs Scramble For Physical Metal

This is the biggest story of the late day with implications for Jamie Dimon, precious metal ETFs, and central banks worldwide.  We'll start at the beginning.

Anyone holding gold miner Rusoro is panicking.

Details from Reuters

Toronto-listed Rusoro, owned by Russia's Agapov family, is the only large gold miner operating in Venezuela.  It produced 100,000 ounces last year.

The gold industry will be just the latest part of the economy to be put under state control by the socialist leader, who said he would issue the necessary decree in the coming days and called on the military to help control the sector.

"I have here the laws allowing the state to exploit gold and all related activities ... we are going to nationalize the gold and we are going to convert it, among other things, into international reserves because gold continues to increase in value," Chavez said in a phone call to state television.

---

WSJ

CARACAS—Venezuela plans to transfer billions of dollars in cash reserves from abroad to banks in Russia, China and Brazil and tons of gold from European banks to its central bank vaults, according to documents reviewed Tuesday by The Wall Street Journal.

The planned moves would include transferring $6.3 billion in cash reserves, most of which Venezuela now keeps in banks such as the Bank for International Settlements in Basel, Switzerland, and Barclays Bank in London to unnamed Russian, Chinese and Brazilian banks, one document said.

Venezuela also plans to move 211 tons of gold it keeps abroad.

---

The problem for Jamie Dimon and JPMorgan is that they hold only 10.6 tonnes of gold, and all of it belongs to Venezuela, though they have pledged approximately 100 times that amount in various paper markets.

ETF News

While Venezuela is a relatively minor player on the world stage, this could be a big game changer here in the United States because one of the banks that holds 10.6 tons of Venezuela’s gold is none other than JP Morgan.  In a recent audit of JP Morgan’s holdings it was reported that they held 338,303 ounces of gold or roughly 10.6 tons.  While this is a modest size deposit it is sure to cause some jitters at JP Morgan as they scramble to find the replacement gold which has already been pledged about 100 times across various paper markets to ETF’s like the SPDR Gold ETF (NYSE:GLD).

---

Bloomberg

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.”

Chavez, who has said he wants to eliminate the “dictatorship” of the U.S. dollar, has called on Venezuela’s central bank to diversify its $28.7 billion in reserves away from U.S. institutions. Some cash reserves, which total $6.3 billion, will be shifted into currencies from emerging markets including China, Russia, Brazil and India, central bank President Nelson Merentes said today at a news conference.

 

 

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Reader Comments (23)

America is now officially in deep doo doo. Batten down the hatches.
Aug 17, 2011 at 11:35 PM | Unregistered Commenterlili
HOLY SHITE!!!
Aug 18, 2011 at 12:12 AM | Unregistered CommenterARRP
Holy shit is right. That's at least what Jamie Dimon is thinking.
Aug 18, 2011 at 12:56 AM | Registered CommenterDailyBail
This may hit like an atomic bomb in the price of gold tomorrow! Gold is on the launch pad! J.P. Morgan's shorts(positions) are going to be set on fire and goodbye to bad stink in the room! It couldn't happen to a nicer bunch of criminals! This could also blow up the derivatives markets! Hang on everybody! Also congress needs to pass the new Glass Steagall Act HR1489 NOW! Call these jackass congress people now! No bailouts will work! 1.5 quadrillion in derivatives is not bailable,it's suicide!
Aug 18, 2011 at 1:28 AM | Unregistered Commenterbob
Good luck.
Aug 18, 2011 at 1:58 AM | Unregistered CommenterDave
I smell a war, nobody messes with the British bankers' goldl! heh heh. Drown m-f'ers

like WRH said, make sure it's not plated tungsten!
Aug 18, 2011 at 2:47 AM | Unregistered Commentergiiuhui
Sounds like Cuban healthcare must be very expensive...
Aug 18, 2011 at 3:52 AM | Unregistered CommenterS. Gompers
Venezuela will never get their gold back... Never! Dreaming is cheaper than reality! The USA/UK will find a lame excuse and blame President Hugo Chavez of been a terrorist and do a Humanitarian Aid job on his ass. Just as they are in Libya...
Aug 18, 2011 at 4:46 AM | Unregistered CommenterAlb
"
like WRH said, make sure it's not plated tungsten! " you betcha ...

so many crimes ,so few prosecutions !
Aug 18, 2011 at 5:12 AM | Unregistered Commentermick
The powerful rushed to steal the Libyan gold and other assets so why would one be amazed that someone would not trust the international bankers. When they stolen the Libyan money they cut their own throats. Europe is now a disaster because I am sure every place on the world is quickly removing money from the thieves in banking. To say the bankers were stupid would be an understand statement. The cry the public is rushing to the safety of treasuries is just plan stupid. It is the federal reverse either directly or via pressure on other banks buying what eill be stolen after they can push the very low interest notes into the stupid public. It is long overdue to hang a few bankers. Bankers by nature are traitors. They need to be eliminated hopefully without the gallow but they must go. The USA treasury of the treasury has never held a real job in his life.
Aug 18, 2011 at 9:49 AM | Unregistered Commentertom dee
@S. Gompers

Or maybe they just want their property back.. At least cuban health care is health care not a billion dollar racket like here where you only treat people who can pay big bucks for mediocre care
..
Aug 18, 2011 at 2:35 PM | Unregistered Commenterfrom_the_bleachers
Bleachers,

They are probably going to find out their gold don't exist anymore. Communist healthcare is still worse than the pathetic mess that we have even with the mess Obama is making of it. The only people benefiting from it are the lobbyists.
Aug 18, 2011 at 3:55 PM | Unregistered CommenterS. Gompers
@ Gomp, something really bad happened to the Venezuelan pension.

http://ibnlive.in.com/generalnewsfeed/news/special-report--pension-scandal-shakes-up-venezuelan-oil-giant/792171.html

Note: the Ponzi Schemer responsible is an American Hedge fund owner. I suspect that Venezuela requesting their gold may be related.

http://ibnlive.in.com/generalnewsfeed/news/special-report--pension-scandal-shakes-up-venezuelan-oil-giant/792171.html

[snip]

U.S. investigators say Illarramendi, the majority owner of the Michael Kenwood Group LLC hedge fund, ran the Ponzi scheme from 2006 until February of this year, using deposits from new investors to repay old ones. He pleaded guilty in March to multiple counts of wire fraud, securities and investment advisor fraud, as well as conspiracy to obstruct justice and defraud the U.S. Securities and Exchange Commission.....

I also want you to posit this. Venezuela has a shitload of oil, Yet our domestic production crashed after the BP incident resulting in 10's of rigs being moved out of the Gulf to foreign waters and permits for exploration/drilling expiring. This will increase our reliance on foreign oil and impact all facets of this economy.

Collateral Damage: Lost Gulf Rigs from Obama Obstructionism (10 down, more to go?)

http://www.masterresource.org/2011/08/lost-gulf-rigs-obama/
Aug 18, 2011 at 4:58 PM | Unregistered Commenterjohn
Furthermore, I would be inclined to believe that things may escalate in Latin America soon.

http://www.jinsa.org/node/2449
Aug 18, 2011 at 5:39 PM | Unregistered Commenterjohn
John,

Thanks for the heads up, however I have been following this closely for a while. Venezuela is a very corrupt country ripe for exploitation such as this. Pensions everywhere are full of these little time bombs, even we are not exempt. I have been stating for a while on here that the fraudulently AAA rated bundled securities that the glorious banking industry sold were sold to pensions, 401k's, mutual funds, etc.. Unfortunately most would rather blame the workers who paid into the funds that are being destroyed and bail out the poor bankers, and completely ignore the investment fund managers.

After all, this is America, so everything must be the peoples fault.

The last multinational I worked for had an account in Caracas, from the time planes landed, the 2 hour drive to the plant and back, those that were required to go there had to have armed guards as the kidnapping and ransom of business people was a very profitable enterprise in Hugo land...

There is not enough gold on earth to cover the paper that has been sold in its name I am afraid. The criminal gets bailed out, and the victim gets victimized again... The new American way.
Aug 18, 2011 at 7:14 PM | Unregistered CommenterS. Gompers
@ gomp,

http://www.activistpost.com/2011/08/us-sets-sale-of-offshore-drilling.html

There is a reason for the offshore wind effort here on the east coast. Here is part of what is happening. The methane hydrate deposits (and others) are huge. The offshore wind effort is a method of gaining access to the resource. Wrong guys... right idea.
Aug 19, 2011 at 5:29 PM | Unregistered Commenterjohn
The Cartel Strikes Back: S&P Downgrades Venezuela to B+

http://12160.info/group/gold_silver_precious_metals/forum/topics/the-cartel-strikes-back-s-p-downgrades-venezuela-to-b?xg_source=activity

[snip]

Venezuela's vast oil and gas reserves "somewhat" offset the policy uncertainty, S&P said. The country posts steady current account surpluses which, combined with strict capital controls, result in positive net asset positions.

However, S&P expressed concern about the actual level of Venezuela's gold and foreign exchange reserves after reports that the country plans to repatriate them.

"When you have the reserves held abroad, you do have some level of confidence," Arevalo told Reuters in an interview. "That is not going to be the case anymore. They are going to be held at the central bank domestically, then you fall in the same circle of lack of transparency that everything else has in Venezuela."
Aug 20, 2011 at 3:28 AM | Unregistered Commenterjohn
Interesting John, I am not familiar with this off shore wind effort.
Aug 20, 2011 at 6:30 AM | Unregistered CommenterS. Gompers
Gomp, here is a USGS fact sheet on the hydrates.

http://marine.usgs.gov/fact-sheets/gas-hydrates/title.html

The offshore wind effort will fail as had many european efforts for financial and various other reasons. This is made worse by hurricane activity which tends to move along the east coast. I am very well versed in the wind sector and early on in my life did civil engineering work which included work for several major mining concerns. The offshore wind effort needs to acquire blocks exactly the same way traditional oil companies do. Companies such as BP and many others are now developing wind but I know damn well the ultimate goal is to secure oil/mineral rights. It is clearly obvious that these 500 foot tall wind turbines on floating platforms will FAIL both financially and mechanically.

http://www.windaction.org/news/c48/?startnum=61

Interior Sec. Salazar was here in New England 2 days ago touting these and said this:

Secretary of the Interior vows to do all he can to aid offshore wind development

http://bangordailynews.com/2011/08/18/energy/secretary-of-the-interior-vows-to-do-all-he-can-to-aid-offshore-wind-development/?ref=mostReadBox
Aug 20, 2011 at 4:53 PM | Unregistered Commenterjohn
Even homeless people are not accepting Federal Reserve Notes, they will work for gold or food
Aug 21, 2011 at 1:19 AM | Unregistered CommenterAl
Let it collapse. I don't care. It will only hurt my first and second wifes. Not me. I want to see them hungry for a change.
Aug 21, 2011 at 1:32 AM | Unregistered CommenterDoug
Hugo make it doubly sure that you get GOLD bars & not TUNGSTEN bars, & have them transferred under a heavy naval guard,otherwise the ship will be lost with all hands, & that's a 100% solution if they are TUNGSTEN BARS!
Aug 21, 2011 at 1:37 AM | Unregistered CommenterIt is I only
@Doug

Thanks for the laugh.
Aug 22, 2011 at 2:57 AM | Registered CommenterDailyBail

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