In the latest in gold news, Iran is now accepting payments in gold from their trading partners as well as other forms of currencies. This shows that gold is more than just a store of value, but also can be used as a form of universal currency.
By Yi Tian
Feb 29, 2012 2:07 AM MT
Iran will accept payments from trading partners in gold in addition to dollars and other currencies, central bank Governor Mahmoud Bahmani said, according to the official Islamic Republic News Agency.
Any nation can pay in its own currency, and Iran has already accepted goods as payment from China and India, the central bank said, according to IRNA. Iran will accept gold from any country, Bahmani said, according to the news agency.
The European Union and U.S. have imposed sanctions to protest Iran’s nuclear program, restricting trade and financial transactions. The U.S. and its allies say they suspect the program is a cover for developing atomic weapons, a contention Iran has denied, maintaining it is for civilian purposes.
“This is a confirmation of gold’s status as a store of value, a universal currency,” Michael Cuggino, who helps manage about $15 billion of assets at Permanent Portfolio (PRPFX) Funds in San Francisco, said by phone. “It transcends national borders.”
Gold has rallied for 11 years as investors sought a hedge against inflation and as the dollar fell. Futures, which reached a record of $1,923.70 an ounce in September, traded little changed at $1,786.40 at 5:06 p.m. in Singapore.
Israeli Prime Minister Benjamin Netanyahu is scheduled to meet President Barack Obama at the White House March 5 amid speculation that Israel may launch a military strike against Iran’s nuclear facilities. The increased geopolitical tension has helped to boost the price of crude, with oil futures in New York gaining 8.3 percent this year to $107.06 a barrel.
An Obama administration official said yesterday that Iran’s action reflects its inability to engage in normal financial activity, and the EU has decided to ban transfers of gold and other precious metals to help block efforts to evade sanctions.
A second U.S. official said Iran’s efforts won’t exempt its trade partners from the U.S. National Defense Authorization Act, which includes a freeze on assets of the Central Bank of Iran and sanctions on overseas financial institutions that engage in arms-length transactions with Iran’s central bank. The officials spoke on condition of anonymity in order to discuss the administration’s internal assessment.
“They are doing this because gold has always been viewed as an alternative currency,” said Wei Chishan, an analyst at Shanghai Metals Market, which has more than 400 researchers.
Central banks bought a record 439.7 metric tons last year and will continue adding bullion in 2012, according to the producer-funded World Gold Council. India and China are the world’s biggest bullion consumers.
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