Iran has been stockpiling gold and selling dollars to reduce its exposure to currency volatility and also to cut its chances of seeing Washington seize its assets, a senior Bank of England official says.
According to a U.S. diplomatic cable obtained by WikiLeaks and observed by the Financial Times, Andrew Bailey, head of banking at the Bank of England, tells a U.S. official that U.K. monetary policy authorities have been observing "significant moves by Iran to purchase gold," and adds the buying "was an attempt by Iran to protect its reserves from risk of seizure."
Market observers tell the newspaper that Iran has been one of the biggest buyers of bullion during the past decade after China, Russia and India, and is among the 20 largest holders of gold reserves.
Other Middle Eastern countries have been buying gold as well, and they're doing it quietly, away from the prying eyes of the International Monetary Fund, a multilateral lending institution.
"The totality of central bank reserves is not what is reported to the IMF," says Philip Klapwijk, executive chairman of GFMS, a precious metals consultancy. "There's probably another 10 percent on top of that."
Investors normally buy gold when the world's reserve currency, the dollar, weakens.
That's been the case for the past few years and should continue to be so in the future.
According to a poll of about 6,000 people, 47 percent believe gold prices will finish 2011 between $1,500 and $1,800 an ounce, up from current prices around $1,425, The Street reports.
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