Iran says it will sell euro instruments for gold and stocks

Iran's Switch Good News for Gold Bugs?

By Ambrose Evans-Pritchard
The Telegraph, London
Tuesday, June 10, 2008

http://blogs.telegraph.co.uk/business/ambrosevanspritchard/june2008/gold...

Good news for long-suffering gold bugs: Iran is switching a chunk of its $80 billion reserves into bullion.

Mohsen Talaie, the deputy foreign minister in charge of economic affairs, said Tehran was pulling its money out of euro instruments (presumably Bunds, BTps, EIB bonds, etc.) to avoid sanctions over its nuclear weapons programme.

"Upon the decision of the government's task force a segment of Iran's foreign exchange assets will be converted into real assets such as gold and stocks," he told Iran's Etemad-e Melli newspaper.

Europe is planning to freeze the assets of Iran's biggest bank Melli. A draft communique for the EU-US summit on Thursday confirms that Europe is ready to join the crackdown on Ahmadinejad.

It all goes to prove the gold bug axiom that nations -- like people -- will invariably turn to bullion as the ultimate store of value when all is threatened.

Iran's demarche did not seem to help gold prices today. It slid $9.5 to $883 an ounce, off almost $150 since the giddy heights of February, despite the surge in oil prices. But then the gold angle to this news has not been given any prominence.

But then too there are a lot of headwinds. As you can see from the 26-year season chart [accompanying this article at the link above], gold tends to have a rough patch from April to early July. It then rockets in September and October (ceteris paribus).

The Iran news may have hurt the euro, which dived in morning trading. The concerted drive by the Fed, the US Treasury, and even President Bush to talk up the dollar before the G8 meeting in Japan may have spooked the dollar shorts. Treasury Secretary Hank Paulson used the word "intervention" for the first time. It would be dangerous to take on the combined might of the world's fortress banks.

With oil at the current price, Iran is building up reserves fast. If it parks 20 percent or so of the buildup in bullion, it could be enough to swing the gold market -- tiny by comparison with energy.

But then you never know. These regimes talk with forked tongue.

When I asked Barrick Gold's Peter Munk in Davos whether it was significant that Vladimir Putin had ordered his central bank to switch 10 percent of Russia's reserves into gold, he just laughed. "That must mean Putin wants to sell gold," he said.

Nothing is ever what it seems.

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