As the Iranian rial hits all-time lows against the U.S. dollar in the wake of international sanctions, Iranians are seeking safer havens in gold and other assets, according to a leading economist at the National Commercial Bank in Saudi Arabia.
Iranians are seeking safer havens in internationally traded currencies and gold as the country faces the prospect of dealing with tougher international sanctions, said Jarmo Kotilaine, chief economist at the leading Middle Eastern bank, according to Bullion Vault, a gold market analysis and investment research website.
On Thursday, the rial stood at 11,180 per dollar, down from 17,800 on Jan. 2, according to Bloomberg Business Week, which cited Mohammad Kashti-Aray, director of the Gold and Jewelry Union of Iran.
Bloomberg reported that foreign-currency traders in Tehran didn't follow instructions from the central bank that told them to trade the dollar at a 14,000-rial rate, instead refusing or only trading at 16,000 rials. Some of Iran's bank directors met Thursday with its central bank governor, Mahmoud Bahmani. The central bank is also planning a Saturday meeting with economists to address the rial's dipping value.
This all follows a law signed by President Barack Obama on New Year's Eve that places heavy international pressure on Iran and President Mahmoud Ahmadinejad. The law is aimed at curbing Iran's oil exports, and it prevents any foreign bank that does business with Iran's central bank to access the U.S. financial system. The European Union is expected to follow with its own sanctions at the end of the month.
Iran's central bank attempted to alleviate the pressure by injecting more foreign currency into the market, said Iran Commerce Minister Mehdi Ghazanfari, according to official state news.
The rial gained strength on Wednesday temporarily, hitting a rate of 14,000 to the U.S. dollar. But by Thursday, it was down to 11,180. Despite the numbers, Bahmani was defiant that the sanctions had any effect on the rial's downturn.
I declare absolutely that the international sanctions have not created any economic problem for the country, Bahmani said, according to state-run media. The enemies know that and are trying to create psychological tensions. But we won't play their game.
Bullion Vault reports that Iranian authorities are becoming worried about Iranians buying gold. In November, Iran's finance minister advised citizens and traders to not buy gold and U.S. dollars. Iranian Web site Asriran reported this week that mesghal.com, a popular gold-price-tracking website, has been blocked.
The sanctions, though, have not halted Iran's military exercises, Reuters reports. Its naval commander said Friday that more would take place next month with an emphasis on the Strait of Hormuz, which is a key area of shipping for much of the world's oil.
Iran's parliamentary elections will take place in less than two months, the country's first election since what many say was a rigged 2009 presidential election that led to riots and protests throughout the country.