Speaking through a telephone call to state television, Libyan leader Moammar Gaddafi delivered quite a defiant tirade on Sunday, March 20, vowing a "long war to victory" and pledging retaliation against the international military action that's descended upon Libya. Many military experts have suggested that the number of troops loyal to Gaddafi could be fewer than 10,000, and argued that Gaddafi will not last long at all.
Moreover, U.S. and European governments have imposed sanctions and frozen Libyan assets worth billions of dollars, including the central bank, sovereign wealth fund and state oil company, resulting in the cutting off of funding for further support activities -- unless Gaddafi has a hidden pot of gold or two somewhere.
As it has turned out, the "long war" threat from Gaddafi may not be as emply as some might think. The Financial Times on March 21 cited data from the International Monetary Fund (IMF) that the Libya holds 143.8 tonnes of gold (see table), but some say the actual amount could be several tonnes higher.
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Instead of in vaults in London, New York or Switzerland, Libyan bullion is in the country held by its central bank, which is under Gaddafi’s control. However, The Financial Times noted some believe that the gold reserves may have been moved from the central bank in the capital, Tripoli, to another location, such as the southern city of Sebha, close to the borders with Chad and Niger.
According to the FT, international banks or trading houses are unlikely to transact anything with Libya at this moment -- let alone gold -- but there still could be other interested counterparties for a swap of arms or cash ... so Gaddafi could conceivably transport the gold to Chad or Niger, where the gold could be swapped.
Libya's gold reserves, ranked No. 23 in the world, ahead of Saudi Arabia as of December 2009 (see table above), are worth around $6.5 billion at current prices -- enough to finance Gaddafi's defense against opposition and international forces for quite a while, to say the least. Furthermore, Gaddafi may have some other assets stashed in "untraceable" places.
Gold prices have been rising, and hit a record of $1445.70 on March 7, primarily driven by safe haven demand in the midst of continuing chaos in the Middle East, the crisis in Japan, a weak dollar and rising inflation. If Gaddafi somehow finds his way to cash in on this pot of gold and make good on his "long war" threat, it would only further gold’s upward cause. And by the way, Goldman Sachs (
GS) just put in a fresh gold price target of $1,480 within three months.
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