Originally published on Bullionstar.com
According to data released by the Swiss customs department on Tuesday, Venezuela has net exported 11 tonnes of gold to Switzerland in February 2016. In January, Venezuela net exported 36 tonnes of gold to Switzerland; in total 48 tonnes was moved in the first two months of this year.
On 16 March 2016, BullionStar researcher Ronan Manly reported, "Venezuela exported 12.5 tonnes of gold to Switzerland on 8 March 2016, via Paris," based on an article by newspaper El Cooperante, establishing, Venezuela has net exported at least 60 tonnes of gold year to date.
Venezuela's economy is in a tight spot. The country suffers from triple-digit inflation and Credit Default Swap (CDS) data shows that traders see a 78% chance on default. The foreign exchange reserves of Venezuela declined by 12% to 13.6 billion US dollars in February, from 15.5 billion US dollars in January of 2016. In an effort to avoid catastrophes, the BCV has a strong motive to employ its official gold reserves.
The gold imported by Switzerland must have been supplied from the official gold reserves of Venezuela's central bank - Banco Central de Venezuela (BCV) - either as sales or swaps. Documents by the US Geological Survey show Venezuela's annual gold production stands at approximately 12 tonnes, which is insufficient to be responsible for the large shipments in recent months and years.
The Swiss customs department publishes trade statistics by weight and value. When using the average monthly gold price to compute the estimated fine gold content from the weight and value disclosed, it shows the gold exported by Venezuela since December 2013 was roughly "99.5% pure" (see the grey dots on the chart below), implying the metal is bullion from the BCV.
Click to enlargeChart 1. The gold imported by Switzerland from Venezuela prior to December 2013 was likely mine output (roughly 80% pure). Imports after December 2013 from Venezuela must have been supplied by the BCV's official gold reserves, as the batches were roughly "99.5% pure."
According to Eurostat, no EU member has imported any gold from Venezuela in the past years - Eurostat's data is updated until December 2015. International Merchandise Trade Statistics provider COMTRADE reports Venezuela has not exported any significant tonnages of gold to countries outside of Europe in recent years - COMTRADE data is updated until November 2015. However, trade statistics do not grant how much gold is, or is not, crossing borders around the globe. Commodities can cross international borders without appearing in trade statistics. As an example, we know the BCV shipped an unspecified quantity of gold out of Caracas to an international destination on 2, 3 and 7 July 2015, while these shipments cannot be traced in any trade statistics at my disposal.
How much unencumbered gold the BCV has left is unknown. For sure, Venezuela's official gold reserves are not as much as the World Gold Council portraits. According to the Council, the BCV still holds 361 tonnes as of Q4 2015, though the balance sheet at the BCV website from November 2015 states "Oro monetario 69,147,656,000," which is worth 11 billion US dollars at an official exchange rate of 0.16. This equates to roughly 296 tonnes of gold, at a nine months rolling average gold price of $1,152.68 an ounce (which is how BCV gold is valued, pointed out by Ronan Manly). According to the BCV website, Venezuela's official gold reserves declined by roughly 60 tonnes from February until June 2015 (from 361 tonnes to 301 tonnes).
The 296 tonnes of monetary gold, as per November 2015, are not fully unencumbered, as the central bank has entered into swaps (of at least 50 tonnes) with bullion banks that provided the metal to remain on the BCV's balance sheets.
According to my estimates the upper bound of the BCV's "unencumbered gold reserves," as of 9 March 2016, is 152 tonnes, the lower bound is 0 (zero). The upper bound estimate is based on the official gold holdings of Venezuela in February 2012 at 366 tonnes, assuming all was unencumbered at the time, after which I have subtracted:
- Venezuelan gold exports to Switzerland in 2013 at 8 tonnes. This gold could have been gold involved in a swap leaving the metal on the BCV balance sheet, while it should be subtracted from Venezuela's "unencumbered gold reserves."
- Venezuelan gold exports to Switzerland in 2014 at 12 tonnes (again, this could have been gold involved in a swap leaving the metal on the BCV balance sheet, while it should be subtracted from Venezuela's unencumbered gold reserves).
- The 50 tonnes gold swap between the BCV and Citibank executed in April 2015 for a tenor of 4 years (presumably this swap included the 50 tonnes the BCV had stored at the Bank Of England, the gold in question remained on the BCV balance sheet according to the website Venezuela Analysis).
- A 60-tonne decline shown on the balance sheet of the BCV from February 2015 until June 2015.
- Venezuelan gold exports to Switzerland in September, October, November and December 2015 at 24 tonnes in total (this could have been gold involved in a swap leaving the metal on the BCV balance sheet, same as in 2013 and 2014).
- Venezuelan gold exports to Switzerland in January, February and March 2016 of 60 tonnes in total.
The calculation excludes the volumes of:
- The unspecified quantity of gold exported out of Caracas to an international destination on 2, 3 and 7 July 2015.
- The gold swaps between BCV and the Bank for International Settlements carried out "in recent years," as reported by Reuters in February 2016 (these deals can match, for example, the exports to Switzerland performed in 2013 and 2014)
- The gold swap with Deutsche Bank in early 2016, as reported by Reuters in February 2016 (these deals can match the exported metal in January and February 2016).