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Venezuela shipping gold bars to sell in Europe.

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Hugo Chavez repatriated most of the country's gold as a "patriotic gesture." Now the country has to pay shipping and insurance fees to send it back to Europe.

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I read this story today too.

 

Venezuela has huge debts right now because of plummeting oil prices. The country's oil revenues account for like 95% of export earnings. So they've taken a hit. And Venezuela has to do something to pay its debt in order support the country's credit rating, which has already been cut simply because of falling crude prices.

 

Interestingly, however, there's another country selling off its gold reserves that the media isn't really paying attention too very much: Canada

 

http://www.cbc.ca/news/business/gold-canada-reserves-1.3443700

 

This is actually something a colleague of mine wrote about recently: http://www.wealthdaily.com/articles/canada-is-selling-off-its-gold-reserves/8037

 

It's important to note, though, that central banks buy and sell gold regularly. Moreover, central banks have been net purchasers of gold overall over the past five years. This is from the World Gold Council's latest updated:

 

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Source: http://www.gold.org/download/file/4815/GDT_Q4_2015.pdf page 26

 

Nevertheless, I do think there is something very worthy of discussion about the reason's why Canada may be selling off its reserves. As reported in the Global News:

 

This latest sell-off is indeed part of a much longer-term pattern of moving away from gold as a government-held asset. According to economist Ian Lee of the Sprott School of Business at Carleton University, Ottawa has no real reason to keep its gold reserves other than adhering to tradition.

Source: http://globalnews.ca/news/2508940/canada-sells-nearly-half-of-all-its-gold-reserves/

 

The key part in the quote about is "tradition". And this is something Pike brought up in his article the other day. The big question...

 

How much does tradition contribute to the reasons any government owns gold?

 

And just how much should we really value tradition as a justification for our economic policies?

 

That said, however, I am bullish on gold prices. I believe that the general market sentiment that drove gold price higher between 2008 and 2011 is returning and will push gold higher over the next several months, at the very least.

 

But I believe that, in the next few decades, more people are going to start to question how much and what role tradition should play in our economic policies. An attack on gold's role in our economic system would seem like the most obvious route.

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From what I know, central banks are awful market timers. My recollection is that they were selling at the bottom in 1999 or 2001.

 

As for why they still own gold, logic should dictate that they are in the best position to fully understand the giant Ponzi schemes they are running.

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The Venezuelan government sold ca. 25% of its gold holdings during the last year or so. They are on their way to being flat broke in a few years.

 

That's what happens with a wanna be socialist utopian paradise in the making. They always run out of everyone's else's money.

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As for why they still own gold, logic should dictate that they are in the best position to fully understand the giant Ponzi schemes they are running.

No doubt. I'm not a big conspiracy theorist. But I absolutely believe massive markets like gold are not left up to chance.

 

...they're not completely left up to chance.

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From what I know, central banks are awful market timers. My recollection is that they were selling at the bottom in 1999 or 2001.

 

As for why they still own gold, logic should dictate that they are in the best position to fully understand the giant Ponzi schemes they are running.

 

The U.K. pretty much sold mad quantities at the very bottom

 

mark

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Practically every asset is manipulated, if that is what you are implying. In this regard, I do not see that gold (or silver) are really any different than other assets.

 

Central banks and governments openly manipulate their own currencies and interest rates. Most of the time, interest rates are distorted to the downside and currencies to the upside. Except in a few cases like Switzerland who attempted to peg the CHF to the Euro which lasted about 30 months before it blew up in their face. For this effort, they have accumulated FX reserves of over $500B (fourth largest in the world) and I suspect their unrealized losses are much greater than the $23B they openly admitted earlier this year.

 

OPEC used to have a lot more influence on the price of oil. That hasn't worked in a long time, despite occasional fictional claims to the contrary. There have also been many attempts to manipulate other commodities, though I can't remember all of them. One I do was tin by several large producers in the 1980's through a price support scheme. That didn't exactly work out so well. DeBeers controlled diamond prices with the Soviet union for decades but they can't succeed at that anymore either.

 

As for gold, it is historically grossly overpriced versus most if not all other commodities today and has been since at least 1995. Anyone can verify this for themselves though historical spot or futures prices. Presumably, this also applies to many other physical goods and many services too. As I stated in a recent post and previously, if anyone attempted to suppress its price since the closure of the gold window in 1971, it has been an abysmal failure.

 

I consider the idea that it is underpriced due to manipulation attempts to be complete fiction.

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From what I know, central banks are awful market timers. My recollection is that they were selling at the bottom in 1999 or 2001.

 

As for why they still own gold, logic should dictate that they are in the best position to fully understand the giant Ponzi schemes they are running.

 

The U.K. pretty much sold mad quantities at the very bottom

 

mark

 

That is what I read as well.

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