PM's advisor explains rise in gold in Iraq
Shafaq News / On Friday, Mudhhir Muhammad Saleh, Advisor to the Prime Minister, outlined the reasons behind the increase in local and foreign gold prices in Iraq.
He highlighted a direct correlation with the official and central market exchange rates of the dollar.
Saleh noted, "Despite the gradual decline of the dollar in the secondary market compared to the official exchange rate, gold prices in the local market are rising steadily." He explained that gold imports are funded at the fixed official exchange rate of 1,320 IQD per dollar through the Central Bank's platform.
Saleh attributed the rise to geopolitical tensions, particularly the "war in Ukraine, which has led some central banks to hedge with gold, driving unprecedented global demand and consequently increasing its prices." He emphasized that external factors primarily drive the local gold price hikes.
International financial institutions predict further gold price increases in the coming months, despite the current strength of the US dollar and high yields on US government bonds.
These factors typically exert downward pressure on gold prices. However, the robust global demand for gold as a haven amid geopolitical uncertainties and central banks' increasing gold reserves contribute to these bullish forecasts for the remainder of 2024.
Saleh cautioned that adopting a global gold reserve system based on market prices could significantly increase gold demand as global trade and economies grow. However, if countries continue to hedge their reserve currencies with gold at fluctuating market prices, it may create a high exchange rate system that could hinder their trade competitiveness.
He concluded, "Unless these groups establish a stable, moderate, and competitive official gold price, their trade competitiveness in the international market will undoubtedly be threatened." He warned that gold could be a double-edged sword in creating a standalone monetary system, necessitating caution in commercial gold policies.
