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Why Gold Reserves in Venezuela Are Declining

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Gold’s surge

Gold has seen some serious sunshine in 2016 as its haven appeal keeps rising significantly. Gold has witnessed a surge of about 2% so far this year. Following the returns for gold, gold mining-based funds like the Direxion Daily Gold Miner (NUGT) and the Direxion Daily Junior Bull Gold 3X (JNUG) have also risen by a whopping 566% and 169%, respectively.

Meanwhile, amid ongoing global concerns, many countries like China and Russia are adding gold to their reserves. But a few countries like Venezuela are selling off their gold.

Gold is a famously recognized as a safe-haven asset that investors and also countries (in this case) may flock to during uncertain times. Haven assets can be used when an economy is in trouble, and sometimes countries can sell off their gold holdings to recover money in troubled periods.

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Crisis for Venezuela

The current situation in Venezuela is challenging. The country’s particular type of socialist government is striving to raise cash to pay for vital imports and service debt, but its economy is nearly in freefall, with output shrinks and inflation concerns continuing hovering. Venezuela’s constitutional instability is just more icing on the cake.

Last resort: gold

During the past year, Venezuela’s central bank swapped part of its gold reserves for $1 billion in cash. Such a gold swap is another indication the country is desperate for cash. Amid such unrest, its gold reserves have fallen to ~$6.2 million in May lower from ~$6.6 million in April. Since February 2015, the Venezuela gold hoard has shrunk to about half its previous size.

Continue to the next and final part for a peek at Germany’s gold stock.

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