Gold in the domestic market is being traded at all-time highs with analysts warning about bubbles in the price of the precious metal.
Emami gold surged more than 2.5% Saturday and was traded at all-time high of 68.5 million rials ($422) in Tehran, according to market data published on the Tehran Gold and Jewelry Union website.
Bahar Azadi gold coin was worth 65 million rials, up over 0.8% compared to Thursday’s close. Likewise, one gram of 18-karat gold was sold for 6.61 million rials -- up 100,000 rials, or 1.5%, compared to the earlier session.
The gold market growth has outpaced hikes in foreign currency rates, which are often said to influence gold prices in Iran.
This has raised rise given rise to renewed concern about a bubble in the prices of the yellow metal. According to Ebrahim Mohammadvali, head of TGJU, the gold coin is traded near 3 million rials above its real value, IBENA reported.
Gold coin grew more than 3% in the last trading week (starting last Saturday) while foreign currencies gained 1.2% during the same period, according to the Persian-language economic newspaper Donya-e-Eqtesad -- the sister publication of Financial Tribune.
It said pent-up demand for gold was the main reason the gold coin advanced past the dollar as there was no significant rise in the international price of gold.
The gold markets in Iran were closed for more than a month due to government restrictions on businesses to curb spread of the coronavirus. The markets reopened in the last week of April after some restrictions were eased.
Gold on Friday in international markets dipped from its highest in nearly two weeks, as investors grew hopeful about economies reopening after Covid-19 lockdowns, but a wave of central banks’ stimulus kept the bullion on course for a weekly gain, Reuters reported.
Spot gold fell 0.8% to $1,704.53 per ounce for the day after hitting $1,722.56, its highest since April 27. Prices were up 0.3% for the week. US gold futures settled 0.7% lower at $1,713.90.
“The gold market is experiencing a new surge in demand… and this is the key factor outpacing the dollar,” Donya-e-Eqtesad said, citing market analysts.
Analysts ascribe sluggish trends in the currency market in part to constraints imposed by the regulator on foreign currencies.
“Since there are restrictions on forex trade, investors prefer to buy gold coins instead,” a market observer told the newspaper.
In a bid to control the near permanent chaos in the currency market in summer 2018, the Central Bank of Iran imposed a cap on currency trade. As a rule, authorized moneychangers are allowed to sell no more than $2,200 to each Iranian in one year.
The limits are still in place as the market is more prone to volatility than any other time in the past,
A US dollar sold for 163,500 rials at Tehran’s open market on Saturday, up 1,000 rials compared to Thursday.
One euro fetched 176,000 rials and the UK pound sterling changed hands for 202,000 rials.
Rates at CBI-affiliated moneychangers were slightly lower. The USD was worth 158,000 rials in bank-based exchange bureaus, up 1% from Thursday prices, the TGJU website said.
