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What Growing U.S. Consumer Spending Means For Energy

According a Macquarie Securities’ research…

A Big Pot of Gold in Libya Could Finance Gadhafi's Long War

As the international military forces are descending upon Libya as we speak, some people have dismissed Libyan leader Moammar Gadhafi's vow of a 'long war to victory' delivered via a telephone call to state television on Sunday, March 20.  After all, many military experts have suggested that Gadhafi's days are numbered since the number of soldiers loyal to Gadhafi could be fewer than 10,000. 

Moreover, US and European governments have imposed sanctions and frozen Libyan assets worth billions of dollars, including the central bank, sovereign wealth fund and state oil company cutting off funding for further support activities....unless Gadhafi has a hidden pot of gold or two somewhere

As it has turned out, the 'long war' threat from Gadhafi may not be as emply as some might think. Financial Times on March 21 cited data from the International Monetary Fund (IMF) that the Libya holds 143.8 tonnes of gold (see table), but some say the actual amount could be several tonnes higher.

Gold Holdings

Instead of vaults in London, York or Switzerland,  Libyan bullion is in the country held by its central bank, which is under Gaddafi’s control.  However, Financial Times noted some believe that the gold reserves may have been moved from the central bank in the capital, Tripoli, to another location such as the southern city of Sebha, close to the borders with Chad and Niger.

According to FT.com. international banks or trading houses are unlikely to transact anything with Libya at this moment, let along gold, but there still could be other interested counterparties for a swap of arms, or cash. So, Gadhafi could conceivably transport the gold to Chad or Niger, where the gold could be swapped.

Libya's gold reserves, ranked No. 23 in the world, ahead of Saudi Arabia, as of December 2009 (see table above), are worth around $6.5 billion at current prices, enough to finance Gadhafi's defense against opposition and international forces for quite a while, to say the least.  Furthermore, Gadhafi may have some other assets stashed in 'untraceable' places.

Gold prices has been rising and hit a record of $1445.70 on March 7 primarily driven by safe haven demand in the midst of continuing chaos in the Middle East, the crisis in Japan, weak dollar and rising inflation. If Gadhafi somehow finds his way to cash in on this pot of gold and make good on his 'long war' threat, it would only further gold and oil’s upward cause. And by the way, Goldman Sachs just put in a fresh gold price target of $1,480 within three months.

By. Dian L. Chu

Related Reading - Crude Oil and Gasoline Could Spike from Gadhafi's 'Long War' in Libya

Dian L. Chu is a market analyst, founder and editor of EconMatters.

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  • Anonymous on March 26 2011 said:
    Not only that, but Obama and the coalition of the unwilling don't have the intestinal fortitude to stick it out.Obama is already looking for the exits.
  • Anonymous on March 26 2011 said:
    To stick what out, Gigantor? THE WAR IN LIBYA IS ABOUT OIL. It's about production falling by l.5 percent or therabout, and the oil price jumping up by 17% to begin with. If Sarkozy and his friends want to protect civilians, then he should protect those in the cité of a town where I once worked, and where an Algerian woman asked the question "Why do we have to live like this"?

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