According to Mohammad Kashti-Aray, president of the Special Commission of Gold and Jewelry, the gold coin registered significant declines during the week to December 13.
Gold and foreign exchange rates in Iran tend to move in tandem as both often turn into safe haven assets when times are bad. Kashti-Aray told state TV that although global gold prices have also declined, lower rates for hard currencies in the market are the main reason why gold prices are also declining.
Prices for the yellow metal were modestly lower in early afternoon US trading Thursday and it is experiencing corrective pullbacks and some chart consolidation from recent gains. February gold futures were last down $2.60 an ounce at $1,247.40, Financial Tribune reported.
As of Thursday the benchmark Bahar Azadi gold coin fetched 37 million rials ($360), slightly up from the previous day, but markedly lower than 39 million rials at the beginning of the week.
According to data released by World Gold Council, Iranian demand for gold coins and bars for the third quarter of 2018 continued its upward momentum. Demand hit 21.1tons - the highest since Q2 2013 – and accounted for three-quarters of the Middle East market.
Renewed sanctions and the plummeting rial underpinned this flight to gold, WGC said. In Iran VAT-free bars and coins were preferred over jewelry, which is subject to 9% tax.
However, 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. If the stability in the forex market continues, gold coin demand could also fall in the fourth quarter of 2048.
The US dollar was traded for 105,000 rials on Thursday as the market remained closed for Friday. The rial’s rebound, from record lows around 190,000 seen in late September, is good news for the Tehran government that is struggling to prevent US sanctions on oil, banking and other industries from pushing the economy into recession.
President Donald Trump reimposed US sanctions on Iran earlier this year after pulling out of the 2015 Iran nuclear deal. Washington has vowed “maximum pressure” on Iran’s economy to force it to accept tougher limits on its nuclear and missile program.
Return to JCPOA
Iran has ruled out the prospect for new negotiations unless Washington reverses its controversial decision to abandon the Joint Comprehensive Plan of Action as the Iran deal is formally known.
The weakening rial disrupted Iran’s foreign trade and pushed up inflation. The Central Bank of Iran boss Abdolansser Hemmati in a Thursday Instagram post said the recent drop in the exchange rate was the result of "natural moderation," adding that the exchange rate is on the path toward becoming "real."
"The central bank guides and manages the forex market with prudence and away from unnecessary noise," the senior banker said.
The new measures, he wrote, which led to more foreign currency being injected into the market by exporters and positive developments about the European Unions in-the-making financial channel are helping the CBI achieve its goals in propping up the value of the national currency.
The European Union's foreign policy chief Federica Mogherini said Monday a system to facilitate non-dollar trade with Iran (known as SPV) and circumvent US sanctions could be in place before the year is out.
According to forex repatriation rules revised by CBI, all exporters of goods and services are obliged to return their export earnings to the country’s economic cycle. The rules stipulate that earnings of up to €1 million are exempt from selling through Nima but they may use it for import of goods and services needed for their own businesses or give it to other importers.
Also for earnings of up to €1-3 million, exporters are obliged to offer 50% of their export earnings on Nima and for revenues over €10 million they should sell 90% via Nima.