The Financial Times has seen a U.S. diplomatic cable from WikiLeaks that states that Iran has bought significant amounts of gold. The word is that Tehran holds 300 tons of gold, up from 169 tons in 1996.

Gold, oil and the U.S. dollar: The oil-rich Middle East sells oil throughout the world. Oil is priced in dollars. The U.S. dollar is the reserve currency for oil. That means that Mideast countries are loaded with U.S. dollars.

The euro is the reserve currency for 16 European countries. With riots raging in Greece against the austerity program, reserve bank managers are wondering about the status of the euro.

Heavy selling is battering the euro, which reached a low of $1.2804 against the U.S. dollar Wednesday. In this atmosphere, central bankers are reluctant to hold euros. They may continue selling, pushing it even lower.

Monetary neurotics, led by the polite, appealing and economically brain-damaged Ron Paul, believe the U.S. dollar is dead because of our growing debt and the Fed running the printing presses, which must lead to inflation, which, in turn, will kill the dollar. Recent falls in the dollar seem to confirm this, uh, shibboleth (look it up again) of the monetary right.

In actuality, though, the dollar is no weaker than it was a few years ago. And it is the only currency in the world for the foreseeable -- and I mean long-term foreseeable -- future that can serve as a reserve currency due not just to our economic and political power, but our political system.

The US dollar is down 20% since 2002 on a trade weighted basis. Other world economies like China are dynamic, with growth rates of 8 and 9%. With that kind of clout, countries like China, India and Brazil, can choose where to place their reserves.

Slowly, developing countries are shifting their reserves away from the dollar into the euro and yen. Neil Mellor, strategist at Bank of New York Mellon Corp (NYSE: BK), which has some $20 trillion dollars in assets under custody said: "I don't think there will be an imminent move, but it is quite clear there's a plan to shift reserves to a more balanced portfolio."

Barclays Capital Research reported that central banks placed 63% of new cash in non US currencies between April and July.

The BRIC nations -- Brazil, Russia, India, China -- basically the powerhouses of the developing world, recently met to discuss, among other things, the possibility of forming an effort to move away from the dollar as the world's reserve currency.

Among options for consideration: a) a shift to another hard currency, b) a shift to a basket of currencies, and c) the possibility of the International Monetary Fund's special drawing rights unit of account serving as the new reserve currency.

Is the dollar's status as the world's reserve currency coming to an end?

It could be, if present trends driven by corrective measures taken to stem the global financial crisis continue, in the view of one monetary official.

European Central Bank council member Ewald Nowotny believes a 'tri-polar' global reserve currency system is developing among Asia, Europe and the United States.

"What I see is a system where we have more centers of gravity," Nowotny said Monday in an interview with Austrian state broadcaster ORF-TV, Bloomberg News reported Monday. "I see for the future a tri-polar development, and I don't think that there will be fixed exchange rates between these poles."

The dollar has served as the world's reserve currency for more than 30 years. A reserve currency is one which financial institutions -- and nations, for that matter -- seek to own during times of financial crisis, stress, or uncertainty. The reserve currency attracts investors in a phenomenon called a 'flight to safety.'

The euro, the currency of the euro zone, this decade has challenged the dollar's reserve currency status, following its introduction into global financial markets in 1999. (Physical euro banknotes and coins began to circulate on January 1, 2002.) A series of U.S. fiscal policy and trade policy errors, among other factors, has caused the dollar to weaken against the euro from about 82 cents per euro in 2001 to the present $1.3317 per euro.

Twenty five trillion dollars in global market capitalization wiped out. At least $500 billion -- and most likely in excess of $1 trillion added to the United States' national debt. The Fed has loaned money to corporations, added massive liquidity to banks, cut interest, and the U.S. Treasury may invest directly in private banks, if it doesn't nationalize them.

And the currency of the nation primarily responsible for the global financial crisis -- the dollar -- how has it fared?

The dollar has been firm, for the most part, even rising against the euro and British pound. However, the dollar has fallen against Japan's yen. As of Friday at 2:35 p.m. EDT, the dollar had risen 2 cents versus the euro to $1.3382 and 1.5 cents versus the pound to $1.6947, but had fallen one-half yen to 99.33.

What will be impact of the Fed's takeover of AIG on the dollar?

Check back in a few days or even a week, according to currency traders.

"There are too many unknown variables to say with any authority right now where the dollar will head from here," currency Trader Andrew Resnick said Wendesday at mid-day. "We'll need at least a few days, maybe a week or so to sort out who the winners are and who the losers will be." Resnick added that he is presently flat (obviously), with no open currency trading positions.

At mid-day the dollar was slightly lower, down about 0.5% against the euro, British pound, and yen. But in the broader context of things, "the dollar's move so far has been small, and statistically insignificant and inconclusive," Resnick said.

"Right now, we're just reworking our statistical models. The problem is, the variables keep changing, so it makes the previous projections less accurate," Resnick said.

At mid-day the dollar was at $1.4136 versus the euro, $1.7921 versus the British pound and at 104.63 versus Japan's yen.

Two scenarios for dollar

The dollar's share of global foreign currency reserves dropped to a record low in the third quarter (Q3), Bloomberg News reported Friday, citing International Monetary Fund data.

The dollar comprised 63.8% of reserves at the end of September 2007, down from 65% at the end of June 2007, the IMF said. Meanwhile, the euro's slice of the reserve pie increased during the same period to 26.4% from 25.5%. The British pound's portion rose to 4.7% from 4.6%.

Dollar doldrums

Analyst C. Leonard Bauer, formerly of Prudential, said a constellation of factors is prompting governments to reduce dollar-based foreign exchange reserves, chief of which is the dollar's decline versus the euro, pound, and other major currencies.

U.S. Federal Reserve Chairman Ben Bernanke told Congress Thursday he sees a slowing U.S. economy heading into 2008.

Bernanke, in a prepared testimony to the U.S. Congress' Joint Economic Committee, said he expects the economy to slow "noticeably" from its third-quarter growth rate and remain sluggish in the first half of 2008. The U.S. economy grew at a 3.9% rate in Q3.

Further, Bernanke added the Fed will make sure that the potential inflationary effect from higher import prices -- stemming from a falling dollar -- does not work itself into the general economy and increase inflation.