Iraq quadrupled its gold holdings to 31.07 tonnes over the course of three months between August and October 2012, data from the International Monetary Fund shows. The IMF's monthly statistics report showed the country's holdings increased to some 23.9 tonnes in August 2012 to 29.7 tonnes.
That was followed by a 2.3-tonne rise in September to 32.09 tonnes and then a cut of 1.02 tonnes in October 2012 to 31.07 tonnes.
It is Iraq's first major move to bolster its gold reserves in months.
The central bank of Iraq’s doubling of its gold reserves this month is important as there are many oil rich nations in the world with sizeable foreign exchange reserves, primarily in dollars, and only a small allocation to gold by these central banks alone could lead to higher gold prices.
36 tonnes is a lot of physical gold, however in terms of dollars it is worth just $1.522 billion which is a tiny fraction of the $80 billion of foreign exchange reserves that Iraq holds.
Energy rich Russia alone has foreign exchange reserves of some $440 billion. Should they decide to allocate a sizeable portion of their reserves to gold, it would rapidly result in materially higher prices.
Signs that the global economy is slowing down and the most serious confrontation between Moscow and the U.S. and its allies since the end of the Cold War is likely to lead to central banks continuing their foreign exchange diversification.
Central banks and the smart money will continue to dollar cost average and accumulate bullion on dips.
My view: As countries begin to reduce their US dollar holdings and the currency reset drawn nearer, we could see a run on gold reserves as central banks attempt to stabilize national currencies.