This past month, the Central Bank of Iraq purchased 36 metric tons of gold, or $1.56 billion worth of the yellow metal, the biggest acquisition of any central bank or nation in three years. The purpose of the immense acquisition is part of a question stabilize the Iraqi dinar against other foreign currencies.
According to the International Monetary Fund (IMF), Iraq maintained 29.8 tons of gold as of August. The last purchase of this size transpired in 2011 when the Mexican government bought 78.5 tons, more than double of Iraq’s. Bullion only accounts for approximately two percent of Iraq’s reserves, compared to that of Germany’s estimated 70 percent.
“Gold is quite attractive to central bankers,” Mark O’Byrne, a director in Dublin at brokerage GoldCore Ltd., told Bloomberg News. “They see it as an important asset diversification and a safe-haven element within foreign-exchange reserves.”
Central banks have been quite adamant in their initiative to buy the precious metal. In 2012, central banks bought 544 tons of gold, the largest amount in the past five decades. However, those purchases have slowed down as central banks only bought 369 tons last year.
Nevertheless, the World Gold Council (WGC) projects that central banks will persist in buying hundreds of tons of gold over the next several years.
“Demand from the likes of Iraq is important,” O’Byrne added. “It doesn’t necessarily mean it will lead to higher gold prices per se, but it definitely means that there’s an ongoing demand from central banks that is likely to continue.”
At the time of this writing, gold is trading at around the $1,300 mark.