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President Chavez took an unprecedented step to call back $11 billion in gold holdings held in financial institutions abroad. He also conveyed his plans to fully nationalize the Venezuelan gold industry.

Venezuela has had 99 tons of its gold reserves with the Bank of England since 1980. Other financial institutions including JPMorgan Chase & Co and Barclays Plc enjoy similar if not larger accounts with the Venezuelan government. Looking at the high prices and the ensuing economic crisis, President Chavez feels it is time to bring the wealth back to the nation.

Some other steps Chavez has introduced in his strategy is to diversify into emerging markets including China, Russia, Brazil, and India or the BRIC nations are they are known. Close to $6.3 billion will be shifted into BRIC nations, said the Central Bank of Venezuela President Nelson Merentes at a news conference.

‘Brutal Place’

Earlier today Chavez said he plans to take control of the country’s gold industry to halt illegal mining and boost reserves. The government is preparing a decree to stop illegal miners exploiting deposits of gold and coltan, an ore containing tantalum, used in mobile phones and video-game consoles, he said.

President Chavez has slowly been nationalizing certain industrial sectors in the nation since 2006 including the oil, petrochemicals, cement, metal, mining and telecommunications industries. Venezuela faces international arbitration over nationalized gold assets from three companies including Crystallex International Corp. (KRY)

“Venezuela has established its position as a brutal place to do business,” Tom Winmill, who manages the Midas Fund in New York, said today in a telephone interview. “Whether it’s a small cap like Crystallex or a large cap like Barrick or Anglo Gold, it doesn’t really make any difference because no one is going to put another nickel into that country,” he said.

Rising gold prices motivated the state to relax restrictions on its gold. It permitted joint ventures and partnerships with the government in order to export some of their production abroad. Venezuela state gold producer Minerven has been shut for 15 days amid a strike, newspaper El Mundo reported today, citing company President Luis Herrera.

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