Gold Silver Reports — Venezuela cut its gold reserves by 16 percent in the first quarter, according to data from the International Monetary Fund, as the country’s economic crisis deepened and the government faced concern that it may struggle to honor bond payments.
The holdings, which stood at 8.77 million ounces at the end of 2015, were unchanged in January, dropped to 7.67 million ounces in February and contracted further to 7.4 million ounces in March, according to data on the IMF’s website. The drop this year follows a 24.4 percent slump in 2015.
Venezuela has been thrown into turmoil by the collapse in oil prices, and President Nicolas Maduro faces rising political tensions amid runaway inflation, a contracting economy and shortages of some basic goods. Vice President for Economic Policy Miguel Perez Abad said this month that Venezuela will continue to use international reserves to help meet its commitments, while cutting back on imports.
As Venezuela’s gold holdings fell in the first quarter, prices surged 16 percent to post the best quarter in three decades. Spot gold traded at $1,224.48 an ounce at 3:39 p.m. in Singapore on Wednesday. In May, the World Gold Council said Venezuela’s gold holdings make up 66 percent of total reserves.
Officials have repeatedly said the country will honor its financial obligations in full and without delay. In February, Trade Minister Jesus Faria said every debt payment this year was guaranteed, including those near term, as well as in October and November. The same month, central bank President Nelson Merentes said the country will continue to make debt payments.
The possibility that the country may be tempted to sell some its bullion holdings to raise funds was flagged in August by Citigroup Inc., which listed Venezuela as a potential seller amid concern that it may default. The nation is one country that may be at risk of selling part of its holdings after oil fell, analysts including David B. Wilson wrote in a report.
Venezuela’s gross domestic product will shrink 8 percent this year after contracting 5.7 percent in 2015, according to the IMF, which forecasts that inflation may climb to almost 500 percent. The reduction in imports this year means the country will have enough cash to honor its bond payments in 2016, according to Eurasia Group and EMSO Asset Management. — Neal Bhai Reports