You are here

Ecuador pawns half its gold reserves with Goldman Sachs

Section: Daily Dispatches

Ecuador Sends Gold Bricks to Goldman Sachs in Liquidity Hunt

By Nathan Gill
Bloomberg News
Monday, June 2, 2014

QUITO, Ecuador -- Ecuador agreed to transfer more than half its gold reserves to Goldman Sachs Group Inc. for three years to give the government easier access to cash.

The central bank said it will send 466,000 ounces of gold to Goldman Sachs, worth about $580 million at current prices, and get the same amount back three years from now. In return, Ecuador will get "instruments of high security and liquidity" and expects to earn a profit of $16 million to $20 million over the term of the accord. The central bank didn't detail additional terms of the transactions, such as any fees or financing costs paid to Goldman Sachs. ...

... Dispatch continues below ...


Just for June: 1-Kilo Gold Bars At Only 1.6% Premium
and Six Months' Free Storage In Singapore Or Zurich

For June only GoldCore is offering 1-kilo gold bars at a premium over spot of only 1.6 percent. This is great value as premiums on kilo bars are usually 2 to 3 percent. For new purchases GoldCore is also offering six months of free, insured, segregated, and allocated storage in Zurich or Singapore.

For more information call Daniel or Sharon at +44 203 0869200 in the United Kingdom or at +1-302-635-1160 in the United States. Or email them at

The deal comes as the South American country's government, which defaulted on about $3.2 billion of bonds five years ago, seeks to cover a budget deficit forecast by the Finance Ministry to swell to a record $4.94 billion this year. President Rafael Correa said in April he also planned to sell about $700 million of foreign debt this year in the country's first international bond sale since the 2008 and 2009 default.

"Gold that was not generating any returns in vaults, causing storage costs, now becomes a productive asset that will generate profits," the central bank said in the statement. "These interventions in the gold market represent the beginning of a new and permanent strategy of active participation by the bank, through purchases, sales, and financial operations, that will contribute to the creation of new financial investment opportunities."

Michael DuVally, a spokesman for New York-based Goldman Sachs, declined to comment. Central Bank President Diego Martinez didn't respond to requests made through the bank's press office seeking more information on the transaction.

The country's gold reserves fell by $605 million, or 55 percent, to $493 million in the week ending May 23, according to a separate report on the central bank's website. The bank, which was stripped of its autonomy in a 2008 constitutional referendum, had about 845,000 troy ounces of gold as of April 14, according to data compiled by Bloomberg.

Last year, Goldman Sachs proposed a swap with Venezuela to provide $1.68 billion in cash to be backed by $1.85 billion of that country’s gold, documents obtained by Bloomberg News showed.

The deal, which wasn't completed, would have carried an interest rate of 7.5 percent plus the three-month London interbank offered rate. Venezuela would have kept its exposure to gold, with the nation posting the precious metal or cash to a margin account if the price fell and Goldman Sachs posting U.S. dollars if it rose, the documents show.

Ecuador's deal with Goldman Sachs is a signal the central bank is short on cash, Vicente Albornoz, the dean of the Universidad de las Americas business school in Quito, said in a telephone interview. The funds should help prop up government spending this year needed to drive economic growth.

"About the only thing that's clear is that they're converting part of their reserves into some sort of cash equivalent," Albornoz said. "If the government doesn't find funds to finance the deficit, it'll have to cut spending."

* * *

Join GATA here:

New Orleans Investment Conference
Hilton New Orleans Riverside Hotel
New Orleans, Louisiana
Wednesday-Saturday, October 22-25, 2014

* * *

Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006:

Or by purchasing a colorful GATA T-shirt:

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

To contribute to GATA, please visit:


Buy precious metals free of value-added tax throughout Europe

Europe Silver Bullion is a fast-growing dealer sourcing its products from renowned mints, refiners, and distributors. Because of a legal loophole that will close soon, you can acquire the world's most popular bullion coins free of value-added tax throughout the European Union. You can collect your order in person at our headquarters in Tallinn, Estonia, or have it delivered in any of the 28 EU countries.

Europe Silver Bullion is owned and operated by North American and European experts in selling, storing, and transporting precious metals. We have an extensive product inventory of silver, gold, platinum, and palladium, and our network spans the world.

Visit us at