Gold demand in Iran soars to 3-year high amid nuclear deal anxieties

Deniz Kılınç / Istanbul, May 8 (DHA) - Gold coin and bar demand in Iran shot up to a three-year high of 9.3 tonnes in the first quarter as Iranians anticipated that the consequences of deteriorating relations with the US would cause Tehran to introduce currency controls, the World Gold Council said in a report.
The open market rate of the Iranian rial (IRR) hit several new all-time lows against the dollar during the first few months of this year as investors sweated over the economic damage that would be caused to the Islamic Republic should US President Donald Trump go ahead with his threat to pull out of the multilateral nuclear deal with Iran on or before a deadline of May 12 and reintroduce heavy sanctions.
As panic spread among the population over the growing cost and scarcity of hard currency, Iran on April 9 unified the official and unofficial exchange rates of the IRR and forbade free market foreign currency trading.
UN Secretary General Antonio Guterres followed nuclear accord signatories the UK, France, Germany, Russia and China in strongly urging Trump not to scrap the nuclear deal, cautioning that the Middle East would become an even more dangerous place if such a crucial diplomatic victory, a foreign policy triumph delivered by Trump’s predecessor Barack Obama in late 2015, was thrown away with nothing better to replace it.
Iran has rejected suggestions that it should be prepared to renegotiate the nuclear deal. On April 25, Iranian President Hassan Rouhani labelled his US counterpart a "tradesman" not qualified to amend the accord.
The World Gold Council report also outlined how as opposed to demand for coins and bars, Iran’s gold jewellery consumption fell 16 percent y/y in the first quarter to 10.7 tonnes. The Iranian government imposed a 9 percent value-added tax on gold jewellery last year, noted Alistair Hewitt, the council’s head of market intelligence. Iran’s central bank also increased the gold coins supply during the first quarter, reducing the premium a little, he said, adding: “These factors would have made coins a more compelling investment for many investors compared to jewellery.”
In battling the anxiety among Iran’s 80mn-strong population that dollars are becoming hard to obtain, only licensed banks may now buy and sell the greenback, officials have been at pains to point out that the country is not facing a currency crisis, but a crisis in accessing currency notes. Currency in the form of letters of credit is said to be relatively easily available to both the private or public sector. Only 5 percent of Iran's hard currency is estimated to be in the form of notes for sale in banks and exchange markets. Iran reported a $17bn currency surplus for last year, with non-oil exports coming in at $47bn and oil exports recording $55bn.