By Daniel Wallis

CARACAS, Nov 25 (Reuters) - Amid wild celebrations, a first shipment of gold bars arrived home in Venezuela on Friday after President Hugo Chavez ordered almost all the country's foreign bullion reserves be repatriated from Western banks.

Excited crowds lined the roadside waving big Venezuelan flags and chanting "It's returned! It's returned!" as a convoy of soldiers and armored cars carried the ingots from Maiquetia airport to the central bank in Caracas.

Experts had cautioned that the operation, which will eventually transport more than 160 tonnes of gold bars worth more than $11 billion to the South American country, would be risky, slow and expensive.

Nelson Merentes, the president of the central bank, traveled into the city at the head of the convoy. He did not say how much gold was brought back in Friday's shipment but said the bullion came from several European countries.

"Our gold is being stored in the vaults," Merentes, sporting a baseball cap that read "The Central Bank of Venezuela with the People," told the cheering crowds.

"We cannot give exact dates (for when the rest of the bars will arrive) due to questions of security. When we bring the last shipment, the people will learn about it."

Drums and sirens sounded out across the square as many in the crowd sang "Forward comandante!" in support of the president. Some waved homemade signs that said "The gold has returned thanks to Chavez!" and "Long live our sovereignty!"

Chavez announced the repatriation in August as a "sovereign" step that would help protect Venezuela's foreign reserves from economic turmoil in the United States and Europe. Most of Venezuela's gold held abroad is in London.

VENEZUELAN VAULTS

It also was seen as a populist measure ahead of a presidential election next October, when the socialist leader will seek another six-year term.

Chavez said he had ordered the National Guard to keep a close eye on the first shipment after it landed.

"They say Chavez is going to take the gold to Miraflores (presidential palace) and is going to give it to Cuba as a gift," the president chuckled on Friday, mocking political rivals who accuse him of planning to sell the ingots to fill his electoral warchest ahead of next year's election.

"The gold is returning to where it was always meant to be: the vaults of the Central Bank of Venezuela."

Like most of those gathered outside the bank, 62-year-old university professor Jose Escalona wholeheartedly agreed.

"There was no reason for it to be in England," he said. "This gold belongs to all Venezuelans."

A senior government source involved in transporting the bars, which amount to 90 percent of Venezuela's gold held abroad, has told Reuters they will be shipped in several cargo flights that will be completed before the end of the year.

The total cost of the operation will be no more than $9 million, the source said, without elaborating.

Chavez often accuses previous presidents of selling off Venezuelans' national assets, including by storing most of the country's gold reserves with Western banks in the mid-1980s.

But his move to repatriate the bullion is unlikely to have any economic impact. Venezuela's finances depends more on oil prices and the markets already have made up their minds about how they view the socialist leader and his policies.

Next year's presidential election is likely to be a hard fought and contentious and some critics suggest Chavez is worried Venezuela's foreign reserves being frozen by sanctions -- as happened to his friend and ally, Libya's late Muammar Gaddafi.

By repatriating the bullion, he also reduces the risk of any seizure of assets related to arbitration cases, including those linked to the nationalization of multibillion-dollar oil projects run by big U.S. companies.

More than 60 percent of Venezuela's international reserves are in gold. That is nearly eight times the regional average of just over 8 percent, and twice that of the second highest in Latin America, Ecuador.

(Additional reporting by Deisy Buitrago; Editing by Bill Trott)