Gold, the Greenback, and the Persian Gulf

Here's an interesting trend ...

According to the Bank for International Settlements, the share of foreign-exchange deposits held in dollars by OPEC, including Saudi Arabia and the UAE, fell to a two-year low of 65% during the second quarter, from 67% in the first quarter.

Now we hear that the United Arab Emirates (UAE) will switch 8% of its foreign-exchange reserves from U.S. dollars into euros before September.

The U.A.E. is already “in a limited way” selling part of its dollar reserves, according to UAE Central Bank Governor Sultan Bin Nasser al-Suwaidi. The total value of the UAE's current reserves is $24.9 billion, 98% in dollars and 2% in euros, so the diversification means the UAE will dump nearly $2 billion in greenbacks.

The UAE is just following the trend set by Russia, Switzerland, Sweden, Italy, New Zealand and Qatar -- to stop piling up so many US dollars.

To me, this casts a shadow over the Dollar's rally off its November lows ... that move is starting to look a little long in the tooth. It wouldn't surprise me to see the US dollar start sliding sooner rather than later.

And yes, that should be good news for gold -- which was up $6.60 today, by the way.

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