Ravaged by oil's collapse, Venezuela now has a big gold problem

By David Boddiger

Venezuela now has a gold problem.

The South American country, which is trying to stave off a bond default in the wake of oil’s swoon, had 68 percent of its international reserves in bullion as of August, according to the World Gold Council. That’s a big worry because the price of the precious metal has tumbled 15 percent from this year’s high in January as the global slump in commodities deepened.

The decline threatens to erode reserves the cash-strapped country relies on to pay its foreign debt. Venezuela, which gets more than 95 percent of its export revenue from oil, will see its hoard plunge by $1 billion if bullion prices don’t rebound, said Alejandro Arreaza, an analyst at Barclays Plc.

“Obviously, it’s the worst of both worlds,” he said.

Venezuela’s dollar-denominated bonds have lost 19.2 percent in the past three months, the most in emerging markets, as the collapse in oil exacerbates concern the nation will run out of money to pay debt. Yields on its benchmark notes climbed past 26 percent on Aug. 6, the highest since February.

Venezuela’s central bank uses a six-month moving average to value its gold, which means the 5 percent drop in the metal over the past month … continue reading

Via:: Tico Times