The Bolivian government intends to buy two tons of gold per year, as a precautionary measure to protect our net international reserves (RIN of the Bolivian Central Bank – BCB). The price will be internationally driven.

The chart above, lists the reserves: dollars, euros, gold and DEG. The first graph shows the Gold Reserves in million dollars and the second graph is for Total Reserves in million dollars.

The government reported that seven tons of gold are produced every year in Bolivia; remaining five tons will continue to be used in the local jewelry market. Gold will be purchased from mining cooperatives, individuals, middle men and private companies.

According to BCB’s website, as of August 31st, the RIN in gold totalled $2,486 million dollars, which is 21.4% of total reserves.

The economic analyst from Milenio Foundation, Napoleón Pacheco, based on data from the Mining Ministry, reported that last year 6,394 kilograms of gold were produced in Bolivia (6.4 tons). From this volume, 2,440 kilograms were exported (2.4 tons).

http://www.la-razon.com/version.php?ArticleId=137187&EditionId=2647

Another financial analyst, Ludwing Toledo, said that as general measure is a good idea to shift to gold from dollars and euros as those currencies are currently unstable. However, Toledo pointed out that it is necessary to define a range of prices, rather than using international value, which he considers dangerous because of its volatility, he also said that international certification should be taken into account.

http://www.eldeber.com.bo/2011/2011-09-09/vernotaeconomia.php?id=110908230402

I hope this new demand on gold production will not damage the market, driving prices up or constraining our gold exports, specially in jewelry. Certifying its quality is a must, we don’t want to realize further into the future that what the government bought is not gold or is not pure in its content.

Up until the 70s, the only institution authorized to buy and/or sell gold was the Mining Bank of Bolivia and it worked. After that, there was an explosion of small towns in questionable neighborhoods where signs of “gold is purchased in any form or weight” triggered the crime rate and cocaine laundering.