EghtesadOnline: A new bull run has started in Iran's gold coin market, on the back of the rally that intensified in the current week.
The benchmark Bahar Azadi coin crossed another psychological threshold in a series of price surges that has rocked the market in recent days.
According to Tehran Gold and Jewelry Union's website, Azadi was up 2.8% on Sunday and fetched 25.32 million rials ($599). Half Bahar gained 1.64% and changed hands for 12.38 million rials ($293), Financial Tribune reported.
Governor of the Central Bank of Iran Valiollah Seif, whose bank had launched both gold coin presales and auctions in the past weeks and months, said CBI faces no problem in balancing supply and demand in the market, IBENA reported.
"The reality is that in the coin presale schemes, seven million coins were presold and these coins will soon enter the market," he said.
The decision to launch gold presales was taken in late February when another forex rally swept the markets, which also swayed the gold market. Back then, the government adopted a variety of other tactics to bolster the rial, with reports in February of currency traders being detained, a number of exchange shops being closed down and some bank accounts frozen.
The measures, of course, proved ineffective in the long run as a fresh rally gripped the market in the early days of the new Iranian year, sending the rial to another record low against the dollar.
The latest rally in the gold market is also accompanied by a similar trend in the forex black market where the US dollar's exchange rate is soaring.
Reports suggest that the rial is being traded for 67,000 rials to the dollar. In a tweet on Monday, Pedram Soltani, the deputy head of Iran Chamber of Commerce, Industries, Mines and Agriculture, warned that the government's insistence on providing importers with the unified exchange rate of 42,000 rials is fueling demand for cheap currency which he said would lead to a "worrying surge" in the exchange rate.
On Tuesday, Seif noted that the current situation in the gold market is mostly rooted in psychological issues and would "go away gradually".
"Of course, the international mood, psychological issues and the magnification of certain problems that lack a real cause have been able to create such an effect in the market, which is not limited to gold," he added.
According to the World Gold Council's latest report published days ago, Iranians' demand for gold coins and bars reached a three-year high in the first quarter of 2018.
US President Donald Trump pulled out of the international nuclear deal with Iran on May 8 and said he would reimpose sanctions within 180 days, prompting several European companies to announce they would end business with Tehran before the Nov. 4 deadline.
Expecting a further slide in the value of rial to 7,000 per US dollar as the shadows of sanctions loom, investors have scrambled to buy gold coin to hedge their bets.
A ban on the physical trade of foreign currencies by exchange shops and limits on the possession of foreign exchange has been cited as other reasons for the rally by analysts.