Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
BLOCKCHAIN INVESTMENT PRIMER - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20
MUST WATCH Before You Waste Money on Buying A New PC Computer System - 27th Nov 20
Gold: Insurance for Prudent Investors, Precious Metals Reduce Risk & Preserve Wealth - 27th Nov 20
How To Spot The End Of An Excess Market Trend Phase - 27th Nov 20
Snow Falling Effect Christmas Lights Outdoor Projector Amazon Review - 27th Nov 20
4 Reasons Why You Shouldn't Put off Your Roof Repairs - 27th Nov 20
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

The Battle for Venezuela’s Gold Serves as a Lesson in Counterparty Risk

Commodities / Gold & Silver 2019 Feb 07, 2019 - 04:11 PM GMT

By: MoneyMetals

Commodities

He who controls the gold makes the rules. That old adage applies aptly to the present crisis in Venezuela.

An international battle for control of Venezuela’s gold is currently underway. At stake is the country’s political future – and with it, the global market for its immense oil reserves.

In a desperate effort to cling to power, Venezuelan strongman Nicolas Maduro has been depleting his country’s gold reserves.

The oil-rich nation once had gold reserves of over 160 tons. But in recent months, Venezuela has sold off dozens of tons of gold to allies such as Turkey, United Arab Emirates, and Russia in exchange for euros and other globally recognized currencies.


Nobody in their right mind wants to conduct international business in the Venezuelan national currency, the bolivar. Even ordinary Venezuelans have largely ditched the bolivar for cryptos and other alternatives as inflation rates in the troubled country top 1,000,000%.

Even as the Venezuelan government was busily hyperinflating its currency and ripping off its people, it still held gold in reserve in order to retain the confidence of foreign creditors including Russia and China. Ordinary Venezuelans couldn’t redeem their rapidly depreciating bolivars for gold, of course. But foreign creditors could effectively demand payment in gold through the conversion of Venezuela’s gold into their preferred currencies.

For several months, President Maduro has been trying to retrieve some $1.2 billion worth of official gold being held in Bank of England vaults.

Fearing reprisals from the United States, which has imposed far-reaching economic sanctions on Venezuela, the Bank of England stalled, gave excuses, and ultimately refused to return Venezuela’s gold.
enezuelan Flag
The Maduro government charges that its gold has been illegally confiscated, in contravention of internationally recognized norms.

Maduro’s U.S.-backed rival, Juan Guaido, is demanding that the Bank of England hand over the gold to him instead!

Guaido is an inexperienced and until very recently obscure political figure in Venezuelan politics. Nevertheless, he has been recognized by the United States as the interim President of Venezuela – even though he hasn’t actually formed a government or removed Maduro from power.

If Guaido gets control over the country’s gold, it could be game over for Maduro. His international creditors would likely begin abandoning him.

U.S. officials have offered Guaido accounts through the Federal Reserve Bank of New York to help him establish financial legitimacy. Perks such as free checking could certainly come in handy when trying to establish a new government!

At the same time, the U.S. government is trying to choke off Maduro financially by targeting anyone who handles Venezuelan gold. Senator Marco Rubio warned United Arab Emirates officials on Thursday that transporting Venezuelan gold would subject them to U.S. sanctions.

National Security Advisor John Bolton stated, “My advice to bankers, brokers, traders, facilitators, and other businesses: don’t deal in gold, oil, or other Venezuelan commodities being stolen from the Venezuelan people by the Maduro mafia. We stand ready to continue to take action.”
That action by the U.S. may even include a military invasion of Venezuela.

Neo-conservative interventionists within the Trump administration are bent on regime change by any means necessary. Secretary of State Mike Pompeo appointed Elliott Abrams – a staunch opponent of Donald Trump and his stated non-interventionist foreign policy principles in 2016 – to oversee regime change in Venezuela.

Abrams has a notorious background as one of the main architects of regime change in Iraq. Before that, he helped fund and organize violent guerilla “freedom fighters” in El Salvador, Guatemala, and Nicaragua. He was even convicted of crimes over his role in covering up the illegal financing of Contra rebels in Nicaragua.

Genuine freedom advocates would love to see Venezuelans take back their country from the repressive socialist rule of Maduro. However, an artificially imposed regime change carried out by heavy handed U.S. interventionists could backfire.

Instead of Venezuela serving as a lesson in the failures of socialism, Marxists, and other anti-American ideologues in the region and around the world will blame U.S. sanctions and other imperialistic aggressions for destroying Venezuela.

U.S. adversaries China and Russia together stand to lose up to $120 billion if their contracts with Maduro’s government are voided. That’s certainly a big incentive for them to forge stronger counter-U.S. political alliances and counter-dollar economic arrangements with other countries that feel threatened by America’s deep state apparatus.

U.S. sanctions against Venezuelan gold are also raising grave concerns about trust and counterparty risk in the global financial system.

If the Bank of England can seize the gold of a sovereign government, is anyone’s gold held anywhere within the global banking system secure?

“In all its operations, the bank observes the highest standards of risk management and abides by all relevant legislation, including applicable financial sanctions,” the Bank of England stated. Essentially, then, its own custodial contracts mean nothing if “relevant” and “applicable” political pressure is brought to bear.
So what’s the lesson here?

One lesson is for countries that are not on the best of terms with the U.S.

Such nations are earnestly developing ways to move assets out of the Federal Reserve Note dollar system and beyond the reach of U.S. financial authorities.

Another lesson relates to how to store gold or silver.

If you don’t want to take personal possession of your precious metals, avoid vaults that are managed by regulated banks. There is absolutely no reason to take on this additional counterparty risk when more private storage options are widely available.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2019 Stefan Gleason - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules