By Michelle Smith Exclusive to — Gold Investing News
Gold has a deep-rooted cultural and investment significance in Iran, and tightening sanctions by the US and EU could intensify its importance. Sanctions are nothing new to Iranians, but the latest measures, coupled with rampant inflation, have ignited concerns about the nation's economic stability. The result has been a recent gold binge and suggestions that these circumstances could affect the broader metals market. Iran's nuclear program is extremely disturbing to many nations, especially the US and the EU. Though Tehran insists that its nuclear activities are for peaceful purposes, the program has resulted in a new wave of sanctions aimed at crippling the government's financial ability to continue it. The US' intensified sanctions include targeting Iran's Central Bank and broadening the scope of asset freezes. The EU has taken similar steps, and has tightened its sanctions with an oil embargo. EU nations cannot enter any new contracts for Iranian oil, and existing agreements are subject to a July 1 cut-off date. Iranians flock to gold Iranians are considered gold hoarders. Gold coins are the average person's investment choice, and are also commonly used to fulfill mehr, a wedding gift required for Muslim brides. But in December, ahead of the additional sanctions, Iranian appetites erupted into a gold rush. The nation's currency, the rial, had lost about 15 percent of its value in the span of a month. With inflation running rampant, the cost of living was rapidly rising and Iranians' currency-based savings were swiftly eroding. Added to that were concerns about the economic outlook and more stringent sanctions that encompassed the Central Bank. People took defensive measures, gobbling up foreign currencies and gold. The metal's price rapidly escalated due to the increase in demand and the declining value of the rial, and there was a wave of profit taking. In January, the Iranian government intervened in an effort to channel money away from assets such as gold and currencies and direct money toward the industrial sector. Efforts to accomplish this task included increasing interest rates and selling bonds with attractive yields.