As Warnings Flash in Venezuela, Gold Holdings Sink Yet Again

  • Country’s bullion holdings drop 5.9% in May, IMF data show
  • Gold reserves contract in the four months through May

As Venezuela’s crisis swells, its gold reserves are shrinking.

The holdings fell again in May, sliding to 6.24 million ounces from 6.63 million ounces in April to post a fourth consecutive drop, according to data from the International Monetary Fund website. Over the past year, the country’s hoard has shrunk 36 percent, and since February 2015 it’s nearly halved.

Vital Imports

Venezuela’s embattled socialist government is striving to raise cash to pay for vital imports and service debt with its economy in near-freefall as output shrinks and consumers seek to survive the world’s worst inflation. The country is embroiled in a parallel constitutional crisis as opposition lawmakers step up moves to challenge the administration of President Nicolas Maduro.

The government may choose to deplete international reserves to meet debt payments through 2016, according to Goldman Sachs Group Inc. Still, the bank said in a note that regardless of the administration’s willingness to pay, “the moment of financial reckoning begins to loom larger.”

For a QuickTake explainer on Venezuela’s crisis, click here.

There are signs the country’s bullion holdings may go on declining. Switzerland imported 5.1 metric tons of gold from Venezuela in June, according to the Swiss Federal Customs Administration.

Fresh Loan

While a fund financed by eight Latin American central banks agreed last week to lend money to Venezuela, the $482.5 million loan isn’t enough to address the chronic shortage of dollars and balance of payments deficit, according to Nomura Holdings Inc. The borrowing plan was challenged by the opposition.

The IMF’s latest forecasts for Venezuela show that the economy will contract 10 percent in 2016, the most in more than a decade, with inflation accelerating to about 700 percent. In July, the World Gold Council said Venezuela’s gold holdings make up 61.7 percent of total reserves.

Bullion has surged 24 percent this year as demand for a haven increased and the Federal Reserve didn’t add to last year’s rate hike. Gold for immediate delivery traded at $1,320.56 an ounce by 8:54 a.m. in New York on Tuesday. In May, as Venezuela’s holdings dropped again, prices lost 6.1 percent.

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