(July 23, 2012) - Just days ago, the international media began to report that the country of Turkey swapped 60 tons of gold from its reserves for several million tons of crude oil from Iran. For gold investors, this is a significant move showing the base level utilitarian value of gold as an investment property. Many Western nations are upset by this because Turkey had promised not to conduct trades with Iran due to sanctions from the West. The sanctions are aimed at curtailing Iran's efforts to expand its energy sector, but by using precious metals instead of currency, Turkey was able to get around the sanctions on a technicality that had not been covered in various diplomatic documents pertaining to the sanction. In the past, SWIFT, an international currency transfer service, would have worked with Iranian financial institutions such as the Central Bank of Iran, but as the Washington Free Beacon reported, this is no longer the case for the Middle Eastern nation that has caught the ire of so many Western nations.
According to Vatan Online, a news website based in Turkey, the value of the gold traded was more than $3 billion. Turkish news outlets have been under close scrutiny from the Central Intelligence Agency of the United States. It was CIA translators who helped decipher the news for Western reporters which expounded upon the transaction between Turkey and Iran that took place in early July. While the US has granted Turkey temporary waivers in the past to help it avoid US sanctions against trading with its neighbor Iran, political pundits believe that these gestures could be questioned in the future.
While this news has strong geopolitical implications for those interested in such topics, for gold investors it demonstrates the core value of the yellow metal is indeed so strong that entire nations can leverage it for their benefit. Neither Turkey nor Iran are known to come close to nations like France, Germany or the US in their holdings of precious metals, but clearly, these nations see the benefit in holding as much as they can. Historically, the trading value of gold and silver has remained strong and because of this, they are considered a far less volatile form of wealth to hold than the currency which is vulnerable to political changes.
A quoted source in a Washington paper had this to say, "The good news is that sanctions are now so powerful that Iran has been forced to follow Ron Paul’s advice and move back to the gold standard from the dollar. The bad news is that Iran is rapidly accumulating large amounts of gold and other minerals with which to barter for goods and services."
It does indeed prove interesting that the leaders of Iran, who most sources agree on share very little in common with Western nations in terms of how they view the world, would still find gold to be a bottom line asset worth accumulating. It will be interesting to see if other nations follow suit because large-scale gold purchases remove gold from the open markets and, typically, its value rises in response to a higher level of scarcity. That is good news that few of those investing in gold would be sorry to hear.