Gold has historically acted as a store of value and for thousands of years it was considered the most important and safest means of payment.

 Further to the collapse of the so called “Gold Standard System”, created to provide for the perfect convertibility between paper-money and gold, and to the liberalisation of the gold market, Gold is no longer the means of payment used in western trades and ordinary commercial practices. In western economies especially it is actually used for hedging against devaluations and economic-political uncertainties. Central banks continue to hold gold reserves as a store of value.

Actually, the power of gold in the current geopolitical scenario is out of question, and not only for its intrinsic value. For a combination of historical, socio-economic and logistical particularities, gold and international terrorism are intimately related.

First, gold tracks day to day changes in the global security situation. Because gold is considered a safe harbour in catastrophic times, the threat of terrorist attacks can send gold prices soaring. On the one hand, this is the effect which comes from the investment decisions of those genuinely concerned with the situation; on the other hand, it is the product of speculation.

Second, the Western fight to dismantle terrorist networks had a strong impact on the strategies recently adopted by Muslims to hold their wealth. The role played by gold as a means of storing wealth is beyond the reach of the Western intelligence agencies. This is particularly evident in the oil producing region of the Emirates, where the concentration of Muslim wealth is greatest due to the size of the region's oil resources.

 Third, gold is an incredibly appealing commodity to hold and transfer value destined to finance terrorist organizations and activities since there are no international reporting requirements for financial transaction in gold and anyone may, in principle, melt it, smelt it or deposit it on accounts with no major questions asked.Furthermore, terrorist organizations may smuggle gold for profit. Smuggling gold is lucrative because certain countries, such as India and Pakistan, have a high demand for gold and legal imports are heavily taxed. 

In addition, for a mix of cultural, ethnic and economic reasons in certain areas of Asia, North Africa and the Middle East, where there is no traditional banking system and money transfer is done through the Hawala, gold is often used by Hawala brokers to balance their books. Hawala dealers very frequently place gold, rather than currency, around the continents.

The Hawala networks are systems/concepts rather foreign to the Western way of doing business. Conversely, they are not so to terrorist organizations, which have relied upon Hawalas conduits to transfer huge amounts of gold to finance their activities.

 Many Hawala centres have been discovered and shut down since September 2001, but… terrorist financiers are well-informed creative blokes and digital currencies backed to gold (E-gold) may be their logical next step. E-gold payment and exchange systems are not science fiction. They exist and are already used to carry out thousands of legitimate financial transactions backed by physical gold.

The physical gold bullion backing E-gold units is at least equivalent to all electronic E-gold units in circulation. The physical gold is held at well known bullion custodians. The transactions executed using the E-gold units do not imply the physical movement of gold in the bullion repository. Account holders have the option to exchange their E-gold units into any major national currency or redeem them and take possession of an equivalent amount of gold coins.

Since these internet based electronic payment and exchange systems resemble the Hawala system in many aspects (i.e. transfer and exchange of currency with no physical movement of money/gold), the suspicion that they may also be used by terrorist financiers is well-founded.

A part from the scope of using digital currencies 100% backed to gold to put in place effective terrorist financing schemes, at this point we must mention the call of Islamic fundamentalists to re-introduce the gold coin as official trading currency in all Muslim countries and territories, just like during the Great Caliphate, when the Gold Dinar was the currency in circulation throughout the Ottoman Empire.

It is reasonable to imagine that the new Islamic gold coin would first of all be used to comply with the most important rules of Islamic law. In particular the payment of Zakat, which according to the Koran every adult Muslim must pay in gold, silver, certain livestock or agricultural products to support those in needs and the cause of Allah. The payment of Zakat in gold means that millions of gold coins would flow into legitimate daily trading and that, at the same time, a potentially huge amount of gold could be redirected by fundamentalist Muslims to support Jihad and fund terrorist organizations.

As a matter of fact, only a few months ago the Islamic state of Kelantan (Malaysia) introduced the gold dinar coin as currency of the country.

 The establishment of a Pan-Islamic economic area, based on a new Gold Dinar as international trading currency is the very future at which fundamental Islam aims both to ensure that fluctuations in US Dollar do not affect international trade, oil exports in particular, and to impose Muslim economic power over the Western countries.  

Just a futuristic plan… or the beginning of a new Islamic golden age…?

Comments Index (Total Messages: 3)

CEO Written by goldnow on 2006-12-08 05:16:47

goldfinger Written by Guest on 2006-12-08 16:44:54 Re: goldfinger Written by Guest on 2006-12-11 15:19:36

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