June 20, 2024

A Rush For Gold In Iran – Currency Collapse Sends Gold Prices Soaring

The already weak economy of Iran faces additional pressure after the European Union banned all oil imports from Iran effective July 1.   The EU actions support a U.S. directed effort to embargo Iranian oil and sanction the Iranian banking system, effectively freezing Iran out of the international financial system.

The moves by the United State and the European Union were taken in an effort to force Iran to abandon its nuclear weapons programs.

Without  foreign currency receipts from the sale of oil, Iran is unable to pay for necessary imports, resulting in soaring inflation and the collapse of the Iranian currency, the rial.  As a result, Iran’s currency tumbles to a new record low and currency holders desperately rush for gold.

The Iranian currency, the rial, tumbled Monday in black market trading to a new record low against the dollar, news agencies said, as the EU moved to impose an oil embargo and fresh sanctions on Tehran.

The unofficial rate in central Tehran was around 20,500 rials to the dollar, the official IRNA news agency reported.

A rush for gold and other non-currency assets has since taken hold, with the price of gold coins in Iran rising by 25 percent since January 18.

As recently as July, it cost only approximately 10,500 rials to buy a dollar, as can be seen in the chart below which depicts the “official” exchange rate.

Courtesy: exchange-rates.org

As the economic collapse in Iran progresses, a desperate population is discovering that ultimately, the only real money is gold.