Venezuela central bank in talks with Deutsche Bank on gold swap
By GCRU Gold News on Saturday, February 6 2016, 01:17 - Permalink
Venezuela's central bank has begun negotiations with Deutsche Bank AG to carry out gold swaps to improve the liquidity of its foreign reserves as it faces heavy debt payments this year, according to two sources familiar with the talks.
Gold swaps allow central banks to receive cash from financial institutions in exchange for lending gold during a specific period of time. They do not tend to affect gold prices because the gold is still owned by Venezuela and does not enter the market.
The sources said Venezuela in recent years had been carrying out gold swaps with the Switzerland-based Bank for International Settlements (BIS) in operations ranging in duration from a week to a year. One source said Venezuela conducted a total of seven such transactions.
The value of Venezuela's monetary gold has declined by $3.5 billion in the 12 months ended in November to reach $10.9 billion, central bank data shows. This appears to reflect swap operations and a 10 percent decline in the price of gold. It was not immediately evident if the central bank has also been selling gold.
The central bank in 2015 carried out a swap with Citigroup Inc's (C.N) Citibank, according to one of the sources. Citi declined to comment in 2015.
One of the sources said the central bank has taken an unspecified amount of gold out of the country so that it can be certified, which is required for gold that is used in such swaps. The gold lost its "certificate of good delivery" in 2011 when Chavez transferred it from foreign banks to central bank coffers, one of the sources said.