By Michelle Smith Exclusive to — Gold Investing News
International trade and goldAs of March 17, however, further financial pressure was applied. Iranian banks subject to EU sanctions, including the Central Bank, were denied access to the Society for Worldwide Interbank Financial Telecommunication (SWIFT). Headquartered in Belgium, SWIFT is a global financial messaging service used to transfer money, and is central to trade transactions. Denying Iran access to SWIFT makes international trade more difficult, but not impossible. There are numerous ways the country can circumvent this measure, and one of them is using gold as currency. Included among the EU's latest sanctions are restrictions on the sale, purchase, transportation, or brokering of gold to, for, or from the Iranian government, the Central Bank, and their associated entities, suggesting that the international community is aware that gold could be an important asset for Iran. Still, in addition to its reserves, Iran may obtain gold from its trade partners. Press TV quoted Central Bank Governor Mahmoud Bahmani as saying that Iran has no problem with countries paying for the price of imports from Iran in gold. India is said to have already purchased oil with gold, and there are suggestions that China, which has blatantly refused to stop using Iranian oil, may also be willing to pay in gold. Iran may not just accept the metal as payment, but may also use gold as a currency itself. There are reports that gold has already been used to purchase at least 200,000 tons of wheat. Iran bullish for gold? Iran's inflation is now placed at levels exceeding 20 percent. A portion of the problem is attributed to excessive unproductive liquidity. While there isn't a reliable official figure, estimates suggest $300 to $350 billion dollars is present in the Iranian economy with only $70 billion being productively used.
Gold is one of the destinations for much of this so-called dormant money because the metal is seen as a savings vehicle and an almost surely profitable investment that is easy to liquidate.Hussein Asadina, described as an economic expert by Press TV, says that $100 billion moves toward gold and foreign currencies. In the gold market, he says, that can create demand for 337 million gold coins, many of which are still unstruck. Though the government wants to attract money away from assets such as gold, given the problems facing the rial and the Iranians' penchant for the metal, gold investors should question how effective those efforts will be, especially if economic conditions continue to deteriorate. Gold demand could significantly increase instead. Furthermore, if gold gains ground for use in trade transactions, the metal's value should increase. There is also the possibility that the trend of gold being used as currency will trickle down to smaller commercial transactions, further impacting gold's value. Some say that attempts to place Iran under financial pressure will be less effective than the US and EU expect. But, if nothing else, there is the relationship between oil prices and gold prices. Historically, the two move in the same direction. The EU has not yet weaned itself off of Iranian oil, but already crude prices are on the rise. Given the various ways that the gold market could be affected by the Iranian economy, investors may want to keep developments on the radar. Securities Disclosure: I, Michelle Smith, hold no direct investment interest in any company mentioned in this article. Iran: Bullish For Gold? from Gold Investing News