Gold Coin Bullish in Tehran Market Despite Massive Supply

EghtesadOnline: Despite several schemes by the Central Bank of Iran to satisfy the supply side, the gold coin rally has come a long way since the early days of the current fiscal year (started March 21).

News ID: ۷۴۵۴۶۱

18 June 2018

The decision to launch gold presales was taken in late February when a foreign exchange rally swept the markets and spilled over into the gold market. Before that, CBI tried to calm the market through a series of gold coin auctions at attractive prices.

The measures, of course, proved ineffective as a fresh rally gripped the market in the early days of the new Iranian year, sending the rial to another record low against the dollar–a rally accompanied by other all-time highs for the gold coin.

A report by IBENA shows that while the benchmark Bahar Azadi coin was priced at 10.70 million rials on April 21, it registered a whopping increase of 8 million rials in the course of just two months, reaching 20.44 million rials on June 14, Financial Tribune reported.

This is while during this period 7.4 million coins have been auctioned by the central bank.

Other similar, cheaper coins have more or less followed the same trajectory.

Mahmoud Ahmadi, CBI’s secretary-general, has said that the bank will fulfill its commitment to deliver the presold coins which, if the current bull run were to persist, will have very attractive prices. The bank had sold Azadi coins with a six-month maturity in April at 10.47 million rials.

Ahmadi is also hoping that the ability of the gold coin preorder receipts to act as certificate bonds on the stock market would help deflate its bubble.

The new measure allows investors in CBI’s gold coin presale scheme to change their presales receipts to “gold coin bonds with proportionate maturity periods”, which possess the security requirements and are tradable in the capital market.

IBENA’s data show that in the last six months, Iranians have purchased 60 tons of gold.

The World Gold Council has reported that Iran’s gold jewelry demand in 2017 reached 45.4 tons, which was up 12% for the year and the most since 2013.

According to the council, Iran and Kuwait were the only Middle Eastern countries that registered higher gold jewelry demand in 2017.

On Sunday, the deputy head of Tehran Gold and Jewelry Union encouraged people to buy gold as a way to support domestic production, saying that by buying gold, investors would “never incur losses”, Banker.ir reported.

This is while some worry that a rush to the gold coin market would cause CBI’s gold reserves to suffer greatly.

This week, a former central bank governor traced the volatility in the gold coin market to the government’s erroneous foreign exchange policies.

Tahmasb Mazaheri criticized the government for continuing with its policy of keeping the rial overvalued by insisting on the unified rate of 42,000 rials.

The government decided to unify the US dollar’s exchange rate at 42,000 rials on April 9 in response to the volatility that saw the rial sink to several all-time lows against the greenback.

Mehr News Agency reported on Sunday that the government has decided to recognize the open market rate–which it banned in its previous directive–by launching a system that would include the free market rate, along with the unified rate of 42,000 rials and the 38,000 rials for essential goods.

According to MNA, which quoted unnamed sources at the Ministry of Industries, purchase orders for non-essential goods such as home appliances have already stopped to be registered with the 42,000-rial rate.