New GCC single currency agreed, will it include gold?
Posted on 31 December 2008 with no comments from readers
Gulf Cooperation Council leaders yesterday concluded their 29th annual summit meeting in Muscat, Oman with a final approval for the creation of a single currency for the six-nation economic bloc, still targeted for 2010.
Saudi Arabia is the largest economy in the GCC and boasts substantial gold reserves. But whether gold will be included in the currency basket has not yet been decided.
Golden opportunity
GCC assistant secretary-general Mohammad Al Mazroui told Gulf News: ‘We first have to decide on the location of the Central Bank, then the Central Bank and Monetary Council will have to decide on the gold reserves for the Central Bank’.
The creation of the GCC single currency – likely to be known as the Khaleeji which means Gulf in Arabic – is a major gold event for two reasons.
First, the breaking of their dollar pegs by the Gulf Arab nations is clearly dollar negative. Secondly, any inclusion of gold either as a part of the monetary basket, or in the reserves of the new GCC Central Bank will create additional demand for the precious metal.
2009 deadline
The project is gathering pace, and no lesser figure than Saudi Arabia’s King Abdullah has directed that GCC economic integration committees speed up their work and complete the whole exercise by September 2009.
It is only a couple of months since a group of Saudi businessmen allegedly bought $3.5 billion worth of gold, believed to be the largest ever single transaction for the precious metal. Perhaps in 2009 it will be gold rather than local currencies which become of interest to speculators about monetary reform in the GCC.
Gulf countries are keen to break away from the link with the US dollar because it ties them to inappropriate monetary policies that exaggerate the boom-to-bust cycle in their economies.
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There has been much talk of a new Silver Dirham and a new Gold Dinar. (Maybe a Silver Dinar.)
In Russia, there has been much recent talk of a silver and gold ruble. The same kinds of discussions are taking place in China.
These are going to be truly historic years.
Very interesting development. History has shown that world power follows the flow of gold.
From Babylon, to Rome, to Byzantium, to London, to the USA. Now, as the western nations sell off their gold reserves, the asian and arab nations are buying it. If the IMF sells, it seems likely China will be waiting with open arms.
Nice report Peter, thank you!
[...] word to spread. Secondly – and here is when it becomes interesting: speculation is about for the GCC currency to be backed by gold. And why shouldn’t it? Not only has the introduction of a then still called ‘Islamic [...]
[...] word to spread. Secondly – and here is when it becomes interesting: speculation is about for the GCC currency to be backed by gold . And why shouldn’t it ? Not only has the introduction of a then still called ‘ Islamic Gold [...]