FYI | Sep 18 2006
By Greg Peel
If you thought the Iranian issue had gone away then don’t be too optimistic. Discussions between Iran and the UN have been extended a couple of months, which the market has taken as a positive sign, but realistically Iran still wants to enrich uranium for nuclear energy and the UN will not trust a government whose policies include the destruction of Israel.
The jury is still out on what might eventuate, but in the meantime the US is stirring up tension once more. Reuters reports US Treasury officials have been visiting counterparts across Europe in a campaign to cut off up to thirty Iranian front companies allegedly involved in “illicit” activities. These activities centre around providing funds for Hezbollah and other terrorist organisations.
The US is clearly not happy with the progress made by the UN Security Council to date and as always is looking to set its own agenda. This includes blocking both direct and indirect access to the US financial system for one of Iran’s leading banks – Bank Saderat. Other banks will also be targeted. The US has received some support from Europe, but not from everyone.
Bank Saderat has responded by suggesting it will dump all its US dollar assets and move to clearing its oil profits through Saudi Arabian banks or friendly European banks.
As yet there has been no response from either the oil price or the gold price, which highlights the fact that the market has suddenly seemed to relax on the geopolitical front. How long this might last is unsure.
In the meantime, India has announced it is close to becoming the fourth country (Australia, US, South Africa) to offer a gold exchange-traded fund listed on its local stock exchange. This is yet another step in the development of financial markets across West Asia, and follows the establishment of a gold and commodity futures exchange in Dubai.
As Indians are among the world’s largest consumers of gold, the ETF should provide yet another fillip to the investment potential of the precious metal.