Chavez Wants Gold Holdings Moved To Venezuela

Melissa Block talks with Jack Farchy of the Financial Times about the challenge of shipping huge amounts of gold overseas. Venezuelan president Hugo Chavez has announced he wants all the country's holdings in gold physically moved to Venezuela. The logistics are tricky — but even trickier is the issue of insurance.

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MELISSA BLOCK, host: With gold trading at record prices, here's a new challenge for what's called the bullion logistics industry. That is, the people who move gold around. The challenge is how to send and insure a really big shipment.

Venezuela's president Hugo Chavez has announced that he wants all of the country's holdings in gold to be physically transferred to his country. That's more than $12 billion worth of gold. And the prospects for shipping it fill our heads with all kinds of James Bond-ish ideas.

Well, Jack Farchy wrote about this for the Financial Times. And, Jack, we're talking about 211 tons of Venezuelan gold. Where is it exactly?

JACK FARCHY: Well, most of it is in the U.K., in the Bank of England vault. There's also a little bit in the U.S. and in Canada.

BLOCK: And it's stored exactly how? I mean, what form does this gold take?

FARCHY: Well, it comes in 400-ounce bars, which is the standard, what's called good delivery bar, which is the standard unit of physical gold trading in the London market which is the center of the global gold market. So that 211 tons is something like 17,000 400-ounce bars.

BLOCK: OK. So, if Hugo Chavez wants to get the 17,000 bars of gold into Venezuela, how do they do that? How does it get there?

FARCHY: Well, the real challenge is one of insurance, because the issue is not so much weight. Two hundred tons is not - it's heavy but it's not huge amounts of cargo especially to move. The issue is, at today's gold price which is a new record, as it seems to be every day these days, it's worth almost $13 billion.

BLOCK: And going up all the time.

FARCHY: And it's going up all the time, exactly. So the real challenge is to find somebody who's prepared to insure that or, alternatively, to just send it in lots and lots of smaller packages, five tons each, which is a more usual amount for physical gold transfers. But, of course, that means that you then have maybe 40 or 50 trips from London to Caracas and a few from New York or Toronto to Caracas, which is not so easy to do, especially given that there are no direct flights from London to Caracas.

BLOCK: What would a five-ton shipment of gold look like physically? How big is that?

FARCHY: Well, so I mean, a 400-ounce bar is a bit smaller than a regular kind of paperback book. So, five tons is about 400 400-ounce bars. Not even, I mean, at 400 very slim paperback books.

BLOCK: So it would be going on what kind of plane?

FARCHY: Well, in general physical gold is often shipped on passenger flights, in fact. Just, you know, it goes along insured with its security guards, along with the rest of the passengers or on a cargo flight. It could also be the case that Venezuela will charter a plane specifically for the job, given the large amount of gold involved here. It may be that they'll charter a plane specifically, maybe even give it a military escort to try and make sure it gets back to Caracas safely.

BLOCK: A military escort?

FARCHY: Well, I've been told by gold traders there have been occasions in the past where military jets have arrived laden with gold.

BLOCK: Let's walk this back a little bit, Jack. Why does Hugo Chavez want the gold repatriated to Venezuela?

FARCHY: Well, it's to do with the fear that it could be thieved or frozen due - for political reasons. I mean, obviously he's seen what happened in Libya, where Libya's foreign assets have all been frozen, at least those that are in Europe and the U.S., and is quite explicit about the concern that the assets could be frozen.

BLOCK: Jack Farchy covers commodities for the Financial Times. Jack, thanks so much.

FARCHY: Thank you very much.

BLOCK: Jack Farchy telling us how the Venezuelan president might have some 211 tons of gold shipped from overseas.

(SOUNDBITE OF MUSIC)

ROBERT SIEGEL, host: This is ALL THINGS CONSIDERED.

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