Gulf Nations Will Break Dollar Peg With New Currency in 2010

Seeking Alpha 12.31.2008
Gulf Cooperation Council leaders yesterday concluded their 29th annual summit meeting in Muscat, Oman with a final approval for the creation of a single currency for the six-nation economic bloc, still targeted for 2010.

Saudi Arabia is the largest economy in the GCC and boasts substantial gold reserves. But whether gold will be included in the currency basket has not yet been decided.

…The creation of the GCC single currency – likely to be known as the Khaleeji which means Gulf in Arabic – is a major gold event for two reasons.

First, the breaking of their dollar pegs by the Gulf Arab nations is clearly dollar negative. Secondly, any inclusion of gold either as a part of the monetary basket, or in the reserves of the new GCC Central Bank will create additional demand for the precious metal.
2009 deadline

The project is gathering pace, and no lesser a figure than Saudi Arabia’s King Abdullah has directed that GCC economic integration committees speed up their work and complete the whole exercise by September 2009.

It is only a couple of months since a group of Saudi businessmen allegedly bought $3.5 billion worth of gold, believed to be the largest ever single transaction for the precious metal. Perhaps in 2009 it will be gold rather than local currencies which become of interest to speculators about monetary reform in the GCC.

Gulf countries are keen to break away from the link with the US dollar because it ties them to inappropriate monetary policies that exaggerate the boom-to-bust cycle in their economies.

GCC wraps up summit with approval of monetary union
China View 12.31.2008

Established in 1981, GCC is a regional political and economic alliance aimed at enhancing cooperation among its six member countries, including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

On Sept. 17, GCC’s finance ministers have hammered out a draft agreement on the monetary union, which involves a single currency and a unified Gulf monetary authority, two key steps toward economic integration.

The draft deal was referred to heads of state and finally got green lighted at the Muscat summit, paving the way for a unified currency for the world’s largest oil-exporting region.