The Iraqi government reveals the reasons for the scarcity of gold in its reserves compared to other currencies
The Iraqi government reveals the reasons for the scarcity of gold in its reserves compared to other currencies
2024-11-13 04:23
Shafaq News/ Mazhar Mohammed Saleh, the financial advisor to the Prime Minister, revealed on Wednesday the reasons for the scarcity of gold in the state’s reserves compared to other hard currencies.
Saleh told Shafaq News Agency, “Some countries still only keep quantities of gold as part of their cash reserves, as the greater focus today is on other assets that can be quickly and easily converted into productive assets that generate returns in the long term.”
He added that “countries are moving away from using gold as a primary store of cash reserves for several reasons related to international economic developments and changes in the nature of modern financial systems, which are restricted by the following main reasons: low returns compared to other assets such as: investment in deposits, or government bonds with a very high credit rating, and far from risks, so gold does not achieve fixed returns like government bonds.”
Saleh continued, saying: “Therefore, most countries prefer to hold assets that provide them with a fixed and stable income, such as: US or European Treasury bonds that can actually generate annual interest. Also, it is difficult to deal with gold in times of crisis, as it is difficult to convert gold into liquidity quickly compared to other financial assets such as foreign currencies and bonds.”
He explained that “the changes in the global financial system since World War II have imposed conditions in which most countries have come to rely on the US dollar as a primary reserve, given that it is the most widely accepted and used global currency in international transactions, which makes holding the dollar or assets linked to it a more flexible option.
The Prime Minister’s advisor pointed out that “the cost of storing gold requires secure spaces to protect it from theft or damage, which may represent an additional burden compared to digital financial assets or liquidity.”
He pointed out that “countries seek to diversify their reserves to include different currencies and various financial assets to achieve greater stability, instead of relying solely on gold to avoid the gold asset cycle and its problems. Therefore, the standard rule is that gold should not exceed an average of 10% of the total value of countries’ reserves.”
Iraq has a foreign exchange reserve of about $100 billion, and 152 tons of gold in its reserves, equivalent to about $12 billion.
shafaq.com
