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Ocean’s 2011: Venezuelan Gold

August 26, 2011

Transporting goldNow might be a good time for Daniel Ocean to start assembling his gang of 11. Venezuelan President Hugo Chavez announced last week that he was ordering the country’s ample gold reserves back to Caracas for safe keeping. Not a bad idea given the global geopolitical environment, but with some 211 tons of 400-ounce gold bars to be moved from bank vaults in London, President Chavez has a logistical nightmare on his hands.

How do you transport vast quantities of gold nearly 4,000 miles from one continent to another?

Reuters blogger Felix Salmon had an interesting piece this week breaking down the major options.

The most direct route would be to fly the gold home, but there are a couple of problems with that option. It would take roughly 40 different shipments to transport 211 tons of gold, the Financial Times says. Intercepting just one shipment would net a robber $300 million, Salmon says, and if not successful, you would have 39 more chances. It’s unlikely there’s an insurance company out there that would take on the responsibility.

Another option is to ship by boat using the Venezuelan Navy. The obvious risk here is piracy. Europe-to-South America shipping routes have a long history of piracy. Throw in the Bermuda Triangle, hurricanes and the incredibly slow pace—you’d have a month’s worth of $12 billion hand-wringing in Caracas.

The most inventive idea Salmon puts forth is to exchange it upon delivery. Gold stored in the Bank of England generally receives a 2 percent premium for its safety and prestige. Chavez could trade his Bank of England bars with another country upon the safe delivery of their own gold bullion in Caracas. This would cost Venezuela at least the 2 percent premium, but save the headache of transporting so much gold.

Even if the gold reaches Caracas safely, the challenge of securely storing it is immense. Salmon calls gold “the perfect heist: anonymous, untraceable, hugely valuable.” The transfer is so risky; this would be the world’s largest transfer of gold since 1936. There’s no official word on where Chavez will store Venezuela’s gold, but he said last week that “if there isn’t enough room to store the gold in the central bank vaults, I can lend you the basement of the Miraflores presidential palace.”

For the record, the U.S. houses its 8,100 tons of gold reserves in Central Kentucky at Fort Knox. The bullion vault lies in the center of a 110,000 acre base that’s also home to more than 10,000 troops and the mechanized tank division of the U.S. army—a security system even Ocean’s 11 couldn’t crack.

We’ll have to wait and see how this story develops, but it’s certain others on both sides of the law are watching closely as well.

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Net Asset Value
as of 09/27/2021

Global Resources Fund PSPFX $6.31 0.10 Gold and Precious Metals Fund USERX $11.22 0.03 World Precious Minerals Fund UNWPX $4.33 0.01 China Region Fund USCOX $8.33 -0.03 Emerging Europe Fund EUROX $6.96 0.08 Global Luxury Goods Fund USLUX $23.90 -0.01 Near-Term Tax Free Fund NEARX $2.24 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $1.99 No Change