Iranian Gold Demand Climbs to Four Year High
Iranian Gold Demand Climbs to Four Year High by Rory – The Daily Coin
In America there still exist this mindset that Iran is some lowly little, “backwoods” nation. Nothing could be further from the truth. Iran’s economy is ranked 18th in the world according to the IMF. Not to shabby and certainly not an economy to be ignored. Iran is one of very few nations in the world that does NOT have a central bank. Their currency is owned by the people and is not sold to the people with interest attached. Iran also likes gold and has plenty of oil.
This is now the second article, in as many weeks, that we have published covering Iran’s gold. Iran is now acquiring gold, with both hands, in front of the latest rounds of economic sanctions coming from the U.S..
Iran’s gold bar and coin sales tripled to 15.2 tons in the second quarter of 2018, the highest in four years, the World Gold Council announced.
It shot up to 15.2 tons–a 200% increase YOY–to reach its highest quarterly level since Q1 2014. Coin demand was healthy, as the Central Bank of Iran increased the amount of gold coins offered in the market. Gold coins have performed well in recent quarters as, unlike gold jewelry, they do not attract 9% VAT.
The country accounted for about three-quarters of Middle East demand for gold bars and coins in the quarter, up from less than half of the region’s usage in 2017 and just 15% in 2016, according to the data. Iran’s currency, the rial, slumped over the three months, prompting the rush.
According to Bloomberg, Iran’s demand for gold bars and coins may remain strong for the rest of the year and even increase as the US reimposes sanctions.
Many Iranians are worried about the economic situation, as US sanctions on Iran’s precious metals trade are to take effect on Aug. 6.
“Demand will stay strong for the rest of the year, around this level or higher,” said Cagdas Kucukemiroglu, an analyst at research firm Metals Focus. “Coins that were pre-sold by the central bank will continue to be delivered to the market,” though jewelry sales will remain subdued, he said.
Concerns Over Currency Depreciation
Iranian demand surpasses that of Saudi Arabia and the UAE. Source
It seems they are preparing for a storm that is on the horizon. By acquiring more gold Iran will be able to continue conducting business with two of her largest and strongest allies – China and Russia. Economic sanctions only hurt the U.S. and have officially lost any and all impact they may have once held.
While demand for the yellow metal is on fire in Iran it is stagnant around the world. We recently confirmed the retail market, in the U.S., is not stagnant it is on life support.
“Demand for physical gold is very high, as the currency has been weakening,” said Masoud Gholampour, an analyst at Novin Investment Bank, in Tehran. “People want to invest in something that’s safe if they think that a crisis may be on the way.”
Since withdrawing from the Iran nuclear accord in May, Trump has ramped up public pressure on the Persian Gulf nation.
“Clearly, with a lot of the aggressive rhetoric between the US and Iran, a lot of investors in Iran are looking to protect their wealth through gold,” said Alistair Hewitt, the World Gold Council’s head of market intelligence.
The global gold bar and coin market remained subdued in Q2 2018. Demand was flat YOY at 247.6 tons.
Price dips often tease out an investor response, but for many markets, the 5.5% fall in the gold price over the quarter failed to translate into buying opportunities because of local currency weakness. Investor concerns over currency depreciation were, however, a driver of demand in some markets, most notably China and Iran. Source
If acquisition cost for gold remain low I would say that Iran will be joined by a great many other nations in reaching multiyear highs in demand. In our analysis of the American Gold Eagles we saw a massive uptick in July 2018 month over month, but we saw a massive decrease in the year over year category. What seems to be happening is gold beginning to attract some much needed attention. I’m stating right now the year is going to surprise a great many people and finish strong and push back into positive territory for the year.