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Venezuela selling gold to cover bond payments

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The government of Venezuela President Nicolas Maduro is pressing for a global accord to cut oil output in a bid to bolster prices. AP

by Sebastian Boyd

Venezuela is selling off its gold reserves.

The value of bullion held by the government fell 9.9 per cent in April and May to $US11.8 billion, according to the most recent data from the central bank. That comes after a $US1.4 billion decline in March. The bank's holdings of gold were down 28 per cent from a year earlier, while the spot price for the metal fell just 12 per cent.

As the cash-strapped country's international reserves hover near a 12-year low of $US15.2 billion and with $US3.5 billion of bond payments this week and next, the country is reducing the amount of illiquid assets in its vaults. Notes from Venezuela, which relies on oil for 95 per cent of export revenue, are trading at distressed levels with swaps contracts pricing in a 96 per cent chance of default over the next five years.

The latest figures support estimates that Venezuela had about $US42 billion of total assets - including off-budget funds - at the end of the third quarter, of which $US15 billion was liquid, Barclays economist Alejandro Arreaza said by phone from New York. He said liquid assets will fall to about $US8 billion by year end. The country and its state oil company have $US12 billion in bond payments coming due next year.

The central bank's press department declined to comment on the decline in gold holdings.

"The Bolivarian government has met all its international commitments, despite domestic and international attacks," Finance Minister Rodolfo Marco Torres said in a Twitter post Wednesday, after Petroleos de Venezuela SA paid $US1.4 billion of maturing bonds.

The Latin American Herald Tribune reported the decline in gold holdings earlier.