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Iran Switches Reserves to Gold - $75 Billion - Who will be next??



November 17, 2008 – Comments (2)

And just like that, one by one the dominoes begin to fall...

China has already indicated its reluctance to take on further USD debt, and if it funds the stimulus with its reserve funds of dollars that alone will be an enormous hot to the greenback. I would expect Russia and Venezuela to make similar indications or follow Iran's lead in the near future. And then... the question becomes, will the ratings agencies perform their duty and report a deteriorating fiscal condition of the USD, or will they refuse to rock the boat as they did in the lead-up to the credit disaster with AAA ratings on names like Ambac?

TEHRAN (Reuters) - Iran has converted financial reserves into gold to avoid future problems, an adviser to President Mahmoud Ahmadinejad said in comments published on Saturday, after the price of oil fell more than 60 percent from a peak in July.

Iran, the world's fourth-largest oil producer, is under U.N. and U.S. sanctions over its disputed nuclear programme and is now also facing declining revenue from its oil exports after crude prices tumbled.

"With the plans of the presidency...the country's money reserves were changed into gold so that we wouldn't be faced with many problems in the future," presidential adviser Mojtaba Samareh-Hashemi was quoted as saying by business daily Poul.

He gave no figures or other details.

Before oil prices plunged by more than 60 percent from a peak of $147 per barrel in July, Iran made windfall gains from its crude exports and in April estimated its foreign exchange reserves at about $80 billion.

Iranian officials in July denied reports Iranian banks were moving funds from Europe, with one report suggesting as much as $75 billion had been withdrawn and converted into gold or placed in Asian banks, because of a threat of tightening sanctions.

The International Monetary Fund said in August that if the price of Iranian crude fell to $75 a barrel, Iran would face a current account deficit in the medium term that would be tough to sustain due to Tehran's financial isolation.

On Friday, U.S. crude fell $1.20 at $57.04.

Gold futures ended more than 5 percent higher on Friday and bullion ended the week about $10 higher compared with its last Friday's close of $735.95 as investors covered short positions.

(Reporting by Zahra Hosseinian; Writing Fredrik Dahl; Editing by Jan Dahinten)


2 Comments – Post Your Own

#1) On November 17, 2008 at 8:14 PM, MarketBottom (28.63) wrote:

Peter J. Cooper’s Weblog November 13, 2008 Saudi Arabia buys $3.5bn of gold in two weeks Filed under: Gold & Silver — peterjcooper @ 8:55 am

There has been an unprecedented surge in Saudi gold purchases in the past two weeks with over $3.5 billion being spent on the yellow metal, reported Gulf News citing local industry sources.

Gold market expert Sami Al Mohna told the leading regional newspaper that this buying had substantially increased the gold reserves of the country: ‘Many Saudi investors see this as the right time for making investments in gold as the price is the most reasonable one at present’.

He said gold was seen as a traditional safe haven at a time of global financial turmoil. Gulf regional stock markets have fallen very sharply since early October, leading to an exodus of cash which needs to find a safe haven.

Gold is currently trading at prices similar to a year ago, and 30 per cent off its March peak. Saudi investors clearly think this is the right time to buy and are piling into gold.

News about the Saudi gold rush is bound to fuel speculation about the alleged large physical gold transactions that have been taking place at prices will above the spot price set in the futures market. It is very unlikely that such a large hoard of physical gold could have been bought for the depressed current price.

Market analysts such as the legendary gold bug Jim Sinclair have pointed out that if less than two thousand millionaires insisted on delivery of physical gold at the end of their futures contracts, as is their legal right, then the spot gold market would jump to new highs.

Saudi Arabian investors have spotted a bargain, and it may be a much better one than they think.

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#2) On November 19, 2008 at 8:32 AM, milpo (46.68) wrote:

And I still hear some people say that Gold is no longer important and will never be used as currency.  Rapid increase in the demand for gold should continue to push up price despite Bernanke and Paulson paper shuffling. The dyingdollardirge has started and it is only going to get louder and sadder. Thanks for the timely post.  The first I heard of this is when I watched Ron Paul yesterday at congressional hearings when he point blank asked Bernanke "are you guys even discussing an alternate currency to the dollar fiat" and "do you guys even discuss gold."

Heartfelt best,


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