Though Argentine newspaper Clarin says the strategy is to buy Japanese yen for the carry trade to speculate in the stock market. Here’s the latest…
Translated in Chome originally posted in Clarin:
The Central Bank will send abroad US $ 462 million in gold bullion . They are about 11,000 thousand kilograms of precious metal that are part of the reserves and as this newspaper was able to know will have as destination London . The BCRA’s strategy is to migrate part of the gold monetary reserves to the international market to carry trades and profitability on bullion. In turn, Federico Sturzenegger , will seek to evangelize with a certificate of quality those gold ingots that were bought by the previous management and that are of “dubious quality”.
The gold lease in international markets and reinvest in more profitable operations (usually a swap yen is chosen), thus generating operation carry trade . “This is already done with all the gold we have in London, because by placing it in that financial place we can expand its use,” Clarín confirmed from the monetary authority. The ingots are not sold, rented, which according to the monetary authority will not affect the final number of total holding of this metal.
According to this newspaper, the ingots are now leased by 30 basis points and are invested by 150 bps. That is, a rate differential of 120 basis points. Of course, prices and rates may fall to international markets. Currently, of the US $ 51,313 million of monetary reserves, only US $ 2,529 million are in gold.
Also sending the gold abroad, Sturzenegger will seek to eliminate some doubts about the quality of the ingots that were bought five years ago under the management of Mercedes Marcó Del Pont . In April 2012 the government had bought gold for US $ 402 million, after 7 years without adding an ounce. It was an acquisition of trouble – in fact, the operation was finalized when the currency traded at record levels – by the threat of holdouts to embargo Argentina’s assets abroad and the ingots were brought to the country. Then in 2015 Alejandro Vanoli would have sought to sell these gold bars but I can not get them out of the country because of the risk of confiscation of the vulture funds.
These ingots, as they count from the local financial market would not have condition of “good delivery”, a kind of certificate that guarantees that the metal is international quality. This concern was the subject of a conversation between Sturzenegger and the president of the Swiss bank UBS during the last Davos Forum. The head of the BCRA got the executive to take the Argentine bars and put the “seal of quality”. The goal is to move the metal to London, although it is not ruled out sending them to Switzerland as well .
Also, in the future the reserves in metal outside the country could serve to the Government like express guarantee in exchange for an international loan. In the Ministry of Finance they deny that it is a short-term plan.
How will they send the ingots? The metal will be transported physically on transatlantic aircraft on scheduled flights. Given the magnitude, the ingots will be divided into two shipments of about 5,000 kilos (about 500 bars) that will occupy a quarter of the total kilometer that can store the aircraft. There are five international companies competing for their ground transportation and each shipment will cost about US $ 70,000 , meaning that the BCRA will disburse at least US $ 140,000.
Since the exit of the default, the government managed to bet on the markets and allowed an additional income of about US $ 100 million per year to the reserves according to the BCRA Ideas Ideas blog. That is why, they say in the BCRA, they will continue to seek to move the reserves out of the local financial plaza.