The Gaddafi regime is sitting on gold reserves of more than $6.5bn (£4bn) which could potentially provide the funds to pay a mercenary army to continue fighting for months.
International Monetary Fund figures show that Libya holds about 143.8 tonnes of gold, putting it into the top 25 nations in terms of reserves held. The UN Security Council last month voted to impose sanctions on the Libyan regime because of its attacks on civilians, backing an arms embargo and assets freeze. The sanctions have hit the investments of regime allies, the country's sovereign wealth fund and state oil company.
However, many of the gold reserves are believed to be held in Libya, providing the regime with potential funds to pay for the "long war" vowed by Colonel Muammar Gaddafi. The no-fly zone and attacks on regime targets by the Western coalition would make it difficult for the regime to transport and sell the gold through normal channels. There was speculation yesterday that some of the reserves could have been shifted south from the central bank in Tripoli to be moved more easily for sale across the border in Chad or Niger.
But Jeffrey Robinson, a writer on money laundering, said it would be nearly impossible to move and sell the gold. "In a civil war you need cash," he said. "As long as he has cash and the ability to murder people, he will have a following. As soon as he runs out of cash, then he's in trouble."
Upheaval in the Arab world has contributed to the driving-up of gold prices to near record highs, with prices yesterday standing at $1,440 per ounce. "Gold is used as insurance for bad governments," Rob McEwen, the chairman of two Canadian gold-mining companies told Reuters yesterday.