The Reformed Broker has put together this graphic to determine just how much gold the Man Who Made Too Much owns. The data is extrapolated from World Gold Council statistics and Paulson & Co’s SEC filings. The Reformed Broker provides a disclaimer about the accuracy of the claim, but his analysis sure provides a fresh way of looking at the concentration of wealth John Paulson’s hedge fund holds in gold.

Adding another nail to the US dollar’s coffin, the Central Bank of Iran publicly stated today that the nation made an extra $5 billion simply by replacing US dollars with euros in its currency basket.

This news could cause more developing and developed nations to drop the dollar for something more stable and more valuable, quickening the dollar’s decline. This news may even cause American households to diversify their savings into something more stable like gold. As large institutions like Central Banks and hedge funds move out of dollars, it is a sure sign of further instability for the currency.

Iran had been planning the switch since 2005 and began enacting the plan in October of 2007. They succeeded in selling 85% of oil in euros, and have limited sales with the US dollar to only 15%, which they are also seeking to perform in a different currency. “Iran has considerably reduced the total of US dollars in its currency basket,” Mahmoud Bahmani, the Central Bank Chief, said at a bankers’ seminar in Tehran.

A report released by the World Gold Council this week, the demand for gold worldwide has increased 10% this quarter. The “demand” figure is comprised of investment demand, industrial demand, ETF demand, and jewelry demand.

In addition to this, the supply of gold has decreased by 5% in the last year.

Central Banks are the driving reason for these figures. Historically, Central Banks are net sellers of gold, and this quarter, they were net buyers.  This year Central Banks have purchased 15 tons more than they sold, whereas last year they sold 77 tons more than they purchased.

Gold is a finite commodity. Every year, only a small amount of gold is produced. According to How Stuff Works

The world produces a cube of gold that is about 4.3 meters (about 14 feet) on each side every year. In other words, all of the gold produced worldwide in one year could just about fit in the average person’s living room!

The Central Bank of Russia announced that they will buy 30 tonnes of gold from Gokhran, the state depository. The Central Bank is following trends from China, India, Sri Lanka, Mauritas and other central banks who are hungrily purchasing gold. Many central banks are fearful of the dollar’s continuing plunge and are retreating into the safe haven gold has offered for centuries as a store of value. The sale will not take place on the open market, but the publicity of the deal adds more price support for gold as other large institutions may follow suit and also decide to buy gold.

Gold continues record climb

Yesterday gold hit another new record with futures rising as high as $1,153.40 an ounce! The price of gold is rising against the dollar but also the euro and pound as well. Gold has gained 29% this year while the dollar has lost 7.3% against a basket of six other currencies. Bloomberg quoted two sources who may have the answer about what is driving the commodities bull run. Stephen Blatt, a commodity analyst,  believes household investors are entering the market looking to protect their wealth:

People are buying gold to protect themselves from the decline in the dollar. We’re going to see further devaluation in the dollar and there’s a desire for diversification into gold.

George Milling-Stanley, a managing director of the gold council, believes that the huge institutional buys we have seen lately are a big factor as well:

There is a growing concern among a lot of central banks about piling up an ever-increasing amount of dollar assets when the dollar is declining. China, Russia, India, Sri Lanka, Mauritius, a whole bunch of countries that have not looked to increase their gold holdings in a long time, are starting to do that. That’s a seismic shift in the central-banking world.

We have seen a lot of excitement today as gold reached new records, with a high that was only a couple bucks shy of that magical spot price of $1100/ounce. The huge driver of this, is, of course India’s big purchase from the IMF. All in all, India has become the tenth largest holder of gold in the world. But India’s growth has been so massive, that of the nation’s foreign exchange reserves, only six percent of it is gold. There is a lot of potential for new acquisitions. China also is underbalanced, in that gold only makes up two percent of the nation’s $2.3 trillion foreign exchange reserves.

The forex reserves of Western nations have the distinction of holding larger percentages of gold. Gold makes up about 77% of the US’s, 69% of Germany’s, 66% of Italy’s and 70% of France’s. The big Central Banks are only allowed to sell 400 metric tons of their supply at a time, so as not to flood the market and dramatically change the price of bullion. But its unlikely that they will even want to sell, as more and more household investors get into the market and the voracious appetite of Eastern Central Banks make the demand for gold higher than ever.

The Reserve Bank of India has bought 200 metric tons of gold from the International Monetary Fund (IMF). This is the IMF’s first gold sale in nine years. It accounts for half of the gold that the IMF told the public would be available for sale in September. There was much anticipation that China or other Asian nations would be interested in the purchase.

N.R. Bhanumrthy, a professor at the National Institute of Public Finance and Policy, says fears about the weak dollar are the main cause for the purchase:

“The fall in the U.S. dollar seems to be pushing all the central banks to strengthen their portfolio with gold. Gold is a safe store of value compared to the U.S. dollar.”

The IMF is the third largest holder of gold bullion in the world, and the entire sale of 400 metric dons they are planning this year accounts for one eighth of its entire reserves. The funds gained from the transaction will be used to lend money to developing nations at low interest rates. “This transaction is an important step toward achieving the objectives of the IMF’s limited gold sales program, which are to help put the fund’s finances on a sound long-term footing and enable us to step up much-needed concession lending to the poorest countries,” said Dominique Strauss-Kahn, the managing director of the IMF.

The trend to invest in gold will the dollar’s bumpy ride continues extends from large institutions to household investors. “Gold production has been declining for the past seven years, while demand, particularly the investment demand has been growing steadily,”  Krishna Reddy, a precious metals analyst told Bloomerg. “Central banks and even ordinary investors want to own more gold.”