Iran’s gold demand triples as people seek safe haven
Iran’s demand for gold tripled in the second quarter, reaching a four-year high, ahead of this month’s US renewal of sanctions that has prompted the rial to shed more than half of its value this year.
Sales of gold bars and coins surged 200 per cent to 15.2 tonnes in the second quarter of 2018, the World Gold Council said in a report on Thursday. Analysts say demand could continue to grow during the rest of the year as the US sanctions come into effect over the coming months, putting further pressure on the currency.
“Iran’s weakening economy, growing sense of insecurity and a currency that has almost halved in value, boosted bar and coin demand,” the report said.
Iranians are hoarding gold bars and coins as their economy, battered by years of sanctions, may weaken further when the US imposes an embargo on Iran’s energy, finance, shipping and insurance sectors on November 4. Next week, Washington will reimpose sanctions on Iran’s purchase of US dollars, its trade in gold and precious metals and its dealings with metals and coal.
Global demand for gold bar and coins in the second quarter was flat year-on-year at 247.6 tonnes but investor concerns on currency depreciation drove demand in the Iranian market, the report said. The Iranian rial had slumped over the three months, prompting the rush for gold investments, which are considered a safe haven amid economic volatility.
The rial dropped to an alltime low this weak but recovered on Wednesday after US president Donald Trump offered to talk with his Iranian counterpart, Hassan Rouhani.
“Looking at the performance of the Iranian rial over the course of 2018 it’s only natural that gold demand has Iranian consumers and manufacturers look to protect against further devaluation in the lead-up to August 6,” said Gaurav Kashyap, market strategist at Equiti Global Markets.
“With the geopolitical situation in the region and political uncertainty domestically, consumers will continue to flock to gold as a safe haven.”