Economy, Business And Markets

Gold’s Third Quirky Sunday

Finance Desk
Gold’s Third Quirky Sunday
Gold’s Third Quirky Sunday

Gold prices in Tehran have experienced odd Sunday spikes for three weeks in a row. Despite dipping prices in global markets and the relative stability in foreign exchange rates, benchmark bullion coin Azadi climbed 60,000 rials on  Sunday and was sold for 9.22 million rials. This was when the greenback remained flat on Saturday’s at 33,980 rials .

This was the third consecutive Sunday rally for the precious metal since the beginning of the Iranian month Shahrivar (started Aug. 23). Idiosyncrasies of the gold market in the final Sundays of the summer has baffled most market observers but some cite dealers’ expectations of a global price hike and other market sentiments as probable reasons for the trend.    

Observers argue that since most international global markets open on Mondays and investors in Iran normally expect a price rally the coming day, they rush to hoard the precious metal. The frenzy, which is independent of the greenback’s fluctuations, results in the so-called “Sunday bull run.”

Last Sunday, gold bullion climbed 0.8% to 9.18 million rials while the US dollar rose only 0.4% against the rial only to slide back in late trade. Gold prices usually rise and fall in tandem with the greenback.  

Other analysts say Sunday’s events have more to do with gold dealers who take advantage of the global holiday to change the course of the market as global prices continue to decline.

 Gold at 6-Year Low

Global gold demand dropped 12% to 914.9 tons in the three months to June, a six-year low, according to the World Gold Council, an industry body. The fall was chiefly the result of weakness in the key markets India and China.

In the case of India, this was linked to seasonal factors, such as the small number of days considered lucky for a wedding, but for China the drop was caused by what is becoming a prolonged period of poor growth and stock market turmoil.

Gold prices eased in Asia Monday with markets in the US and Canada shut for a holiday.

By 11:14 GMT, Monday, bullion coin Azadi changed hands at 9.16m rials, 0.33% lower than the previous day’s close. Azadi’s sister coin, Emami fell 0.44% to 9.16m  rials.

The US dollar fell 0.44% against the rial and was sold for 34,050 rials to gain some lost territory for the Iranian currency. The rial has fallen sharply against the greenback during the past two weeks with the latter hitting a five-month high on August 26.

The rout, however, considerably narrowed the gulf between the exchange rate for official dollar and the free market, paving the way for a possible unification of exchange rates.  

Ali Mohammad Ahmadi, a lawmaker, on Monday blamed the government’s monetary tightening for the recent rial fall. He claimed the tightening of monetary policies in the forex market had stemmed the flow of foreign currency into the economy.

“There has also been a surge in demand for foreign currencies as the annual hajj season draws closer,” he was quoted as saying.