GCC states should boost their foreign reserve holdings of gold to help shield their billions of dollars of assets from turbulence in global currency markets, say economists at the Dubai International Financial Centre Authority (DIFCA).

Tom Arnold at The National

EXCERPTS:

Diversifying more of their reserves from US dollars to the yellow metal would help to offer central banks in the region higher investment returns, said Dr Nasser Saidi, the chief economist of DIFCA, and Dr Fabio Scacciavillani, the director of macroeconomics and statistics at the authority.

“When you have a great deal of economic uncertainty, going into paper assets, whatever they may be – stocks, bonds, other types of equity – is not attractive,” said Dr Saidi. “That makes gold more attractive.”

Declines in the dollar during recent months have dented the value of GCC oil revenues, which are predominantly weighted in the greenback.

Longer term, gold could play a more important role in the global monetary system as the shift from developed world to emerging markets intensified, the two DIFCA economists said in a report published yesterday.

The dollar’s position as the leading reserve currency was likely to diminish as US dominance of the world economy dwindled.

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