Monday, September 19, 2011

Gold Mining nationalized in Venezuela

Hugo Chavez nationalized the mining of gold in Venezuela. Private mining becomes illegal. Why? Apparently many poor mine in the rainforest causing income/tax loss to the government while destroying the environment. Read here. At the same time he announced that Venezuela will bring home $11 billion in gold bullion currently held in vaults in various oversea banks such as JP Morgan. Now that is an interesting move. Is the gold market becoming illiquid? Will this cause a run on physical gold? It is easier to control at home in the National Bank of Venezuela than abroad. It could be a safeguard to avoid having it confiscated by other nations or being blackmailed through political sanctions. Either way it seems a smart move. Or it could be a requirement by China, Russia or Brazil to have the gold bullion at home as a security or guarantee for the loans of $30+ billions received from these 3 countries over the last couple of years. Here are some more thoughts on the Why.

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