Hugo Chavez, the leader of Venezuela, helped to send the price of gold coins past $1,900 an ounce in August when he announced his country would repatriate its gold industry.

November 28, 2011 – Hugo Chavez, the leader of Venezuela, helped to send the price of gold coins past $1,900 an ounce in August when he announced his country would repatriate its gold industry. Venezuela’s gold has been kept in vaults in London, along with the gold belonging to many sovereign governments. The decision to formally request the physical delivery of that gold is both expensive and rare.

It is most likely the event is positive sign for the price of gold and the event will contribute to the factors in the gold price over the coming week. The first shipment of gold from London arrived in Venezuela this weekend, according to Bloomberg. Chavez’s move has not prompted similar repatriations in South America yet, but is an indication as to how countries around the world are reacting to the debt crisis in Europe.

Recently, Brazil rejected a plea to buy European bonds, saying, “They have to find solutions to the European problems within Europe.” A disengagement from the European debt problem by the countries it formerly colonized provides a relatively immediate negative sentiment in the market but is not necessarily a make or break decision.

The price of gold, on the other hands, reacts very quickly and strongly to this news. As Venezuela takes its first shipment of physical gold and the debt problem rears its ugly head yet again this week in Europe, the path markers for the price of gold to increase are certainly present.

This is also an international statement on the value of owning physical metal. While allowing your gold to be held for you is sometimes simply a necessity, there is no substitute for holding physical gold. Gold does operate on fractional reserve lending, so institutions can trade in multiples of the actual underlying physical gold. If that in itself is not enough of an argument to own physical gold, consider that Hugo Chavez, widely called a dictator, has taken physical ownership of his country’s gold from vaults in London.

Any kind of news about the transfer of physical ownership of gold from one party to another typically instigates a rise in the price of gold coins. In this case, we also see a very strong statement, which you can interpret as you see fit, about the nature and status of physical ownership of gold . Clearly, Venezuela’s gold is worth enough to Hugo Chavez to formally have it shipped to his home from London.

Kevin Johnson

Senior Staff Writer – GoldCoin.net