CBI, Capital Market Agree to Control Gold Coin Bull Run

EghtesadOnline: As gold coin prices are skyrocketing, the Central Bank of Iran has reached an agreement with the capital market on implementing the latest scheme aimed at controlling the bull run.

News ID: ۷۴۵۵۳۱

25 June 2018

Representatives with the monetary regulator signed the agreement during a meeting on Sunday with counterparts at the Iran Mercantile Exchange and Bank Melli Iran Brokerage Company, the CBI’s website reported

The main focus of the agreement, signed by Vice Governor Akbar Komijani, deputy for economic affairs, Peyman Qorbani, and Secretary-General Mahmoud Ahmadi on behalf of CBI, is to work out the details of the recently-announced scheme to issue bond certificates for the pre-purchase of gold coins in the capital market, according to Financial Tribune.

Ahmadi had announced in June that in addition to liquidizing gold coin receipts handed out to applicants as part of CBI’s now-halted presale scheme, “these bonds will help balance and stabilize the gold market”.

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

Gold coins have become a sort of safe haven for investors and the general public alike, as the Iranian rial continues to slide. This is not to ignore short-term speculators.

The market has witnessed unabated demand for gold coins and a non-stop surge in their value, although CBI officials continued to predict a fall in gold coin prices after the government unified the country’s dual foreign exchange rates on April 9.

A World Gold Council report in early May showed that Iran’s gold demand more than tripled in the first quarter of 2018 to stand at a three-year high. Only days later, US President Donald Trump withdrew from the Joint Comprehensive Plan of Action and further destabilized Iran’s markets by quitting the country’s nuclear deal with world powers and promising “harshest sanctions in history”.

The benchmark Bahar Azadi gold coin has only intensified its rally in the past few days. It exceeded 30 million rials ($705) on Sunday, an all-time high that hardly anyone could believe would come about even a month earlier, to mirror the staggering rise in foreign exchange rates.

The USD changed hands for 86,000 rials in Tehran’s downtown black markets at the time of writing. This is while unconfirmed reports put its rate close to 90,000 rials. The American currency had only breached the 80,000-rial barrier a day earlier. The greenback’s open market rates are almost double the government’s so-called unified rate of 42,000 rials at present.

During Sunday’s meeting between CBI and capital market representatives, it was decreed that both sides would help establish an online system that would allow applicants to trade in gold coin certificates as soon as possible.

The system is to include detailed information on how the scheme is to be implemented, and roles played by sellers, purchasers, the capital market and the CBI.

Furthermore, CBI and the capital market also agreed to mount a public campaign to inform the public and potential beneficiaries of the details of the scheme.

“We hope that public trust will be able to create a booming secondary market that would prove effective in terms of creating market and price stability,” Komijani said.

He also referred to rising global prices as a reason behind the gold price surge in Iran.

The meeting came as the second round of gold coins that were offered as part of CBI’s previous presales scheme are to hit the market in about three weeks. In this vein, Komijani said CBI is ready to kickstart the presale scheme through Bank Melli’s Bank Kargoshaee at any time the market demands it.

Ahmadi said the eight million gold coins sold during the presales are ready to be offered to buyers.

“Even though we are facing no problem in handing out the presold coins, the CBI wishes to see gold coin certificates replace physical coins,” he said.

Qorbani emphasized the importance of public trust as a key factor in the success of the gold coin certificate scheme. “The important thing that must be announced to the people is that these bonds equal coins and are tradable at any time,” he concluded.