Kashtiaray said moves by the Central Bank of Iran in the forex market had a direct impact on the gold market leading to the steady reversals in its fortunes.
"The price of [benchmark Bahar Azadi] coin was 40.1 million rials at the beginning of the week but later dropped to 3.58 million rials," Kashtiaray was quoted as saying by the state television.
In his opinion, the bearish market had prompted ordinary investors to sell the coins "kept in their homes."
Gold, which turned into a popular safe haven asset during the past six months when the national currency rial lost much of its value, usually gains in tandem with foreign exchange rates, especially the US dollar, Financial Tribune reported.
The rial pared more of its losses against the dollar on Thursday and was quoted at around 115, 000 rials to the greenback, down from 117,000 rials the previous day. The rial also gained against other major currencies on Thursday.
He predicted that if the bear currency market continues, the number of sellers of the popular gold coin will rise further depressing the market for the yellow metal.
"The desire for buying gold and gold coins has apparently subsided and one can see a plethora of sellers in the market," he said.
Governor of the Central Bank of Iran Abdolnasser Hemmati told reporters on Wednesday market indices suggest that the forex market seems to be "moderating."
In his opinion "The country should enter the economic boom and with the pattern we see now in the inflation and forex rates, we hope things will get better.”
Inflation registered a year-on-year increase of 34.9% in the Iranian month Aban (Oct. 23-Nov. 21) compared with the similar month of last year according to the Statistical Center of Iran.
The domestic foreign exchange market entered serious volatile territory around the time the US announced that it will impose fresh sanctions on Iran. The Trump administration imposed new sanctions on November 5 aimed at “zeroing oil and gas exports” and said these sanctions would be the toughest yet on Iran.
The hawkish and rabidly anti-Iran secretary of state, Mike Pompeo, later announced that eight countries would be exempt from Iran’s sanctions for six months.
Gold Demand Highest in Over 5 Years
According to data released by World Gold Council demand for gold coins and bars in Iran for the third quarter of 2018 continued its positive momentum. Demand hit 21.1tons - the highest since Q2 2013 – and accounted for three-quarters of the Middle East market.
Renewed American pressure and the plummeting rial – with expectations for further declines – underpinned the flight to the safe haven metal, the WGC said. VAT-free bars and coins were preferred over jewelry, which is subject to 9% tax.
However, Iranian jewelry demand saw the largest fall in the region for the second consecutive quarter, down almost 60% YOY in Q3. Year to date, demand has shrunk by 36%, suffering under renewed economic sanctions and the steep decline in the rial. By contrast, VAT-exempt bars and coins benefited from a flight to safety
The Middle East bar and coin market has also continued its recent up trend, rising 144% YOY and 28% QOQ. Demand reached 27.8t, its highest level since Q2 2013, a period when demand spiked in response to a sharp fall in international gold prices.