India is to pay for Iranian oil with gold, and it seems that China will soon follow suit.
(1888PressRelease) January 25, 2012 - MIAMI, FL - India and China together account for 40% of Iran's oil exports. Using gold, rather than dollars, would allow these two major economies to bypass an upcoming freeze on the assets of the central bank of Iran. Also, this offers Iran a large market for oil that it would otherwise have difficulty selling due to an embargo by the European Union. India purchases around 12 billion dollars' worth of oil from Iran annually, which would mean a vast amount of gold changing hands and would likely cause a surge in the price of the yellow metal.
"For India to pay for oil using gold bullion instead of dollars is a surprise for the markets and can only result in higher prices for gold," says Bill Hionas of Pan American Metals of Miami. "The amount of gold changing hands will be vast, even more so if China follows suit. Both countries have come out in opposition of the American and European embargo on Iranian oil."
Israel has expressed strong disappointment at the decision by the European Union to phase in an oil embargo over a six-month period, arguing that this gives Iran time to conceal its nuclear facilities underground and that the embargo needs to be immediate.
Any escalation in the Iranian crisis is likely to be supportive of an increase in the price of gold, since gold provides a safe haven for investors in times of political unrest. India's choice of gold as a 'currency' to buy oil is also likely to have a major effect on the market.
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India is to pay for Iranian oil with gold, and it seems that China will soon follow suit. 
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