The Azadi gold coin rebounded from a two-month trough on Monday as lower prices spurred more buying from investors who curbed their enthusiasm about Iran and the world powers striking a nuclear deal.
The benchmark bullion coin which had its worse losing streak in 12 months on Saturday and Sunday morning, following gold’s sharp losses on Friday, recovered some lost ground as lower prices prompted some traders to go long on the precious coin.
Azadi’s gains were also backed by a rebound in the US dollar’s value versus the rial.
“The Azadi’s slide on Saturday was partly owed to the dollar’s fall,” said a veteran currency trader on Fredowsi Street – Tehran’s center of currency trade – to the Financial Tribune, “everyone got optimistic about the nuclear talks, after foreign ministers [Javad] Zarif and [John] Kerry met in Munich, and now the fervor has subsided.”
Azadi advanced 1.12 percent to 9,890,000 rials by 09:26 GMT on Monday, after it touched a two-month low of 9,720,000 rials on Sunday’s trade. The benchmark precious coin is still headed for its worst monthly decline in the past year.
Gold coin prices were also helped by the precious metal’s gains in the international markets on Monday’s open in Asia.
Spot gold had gained 0.61 percent to $1,241.59 an ounce by 09:26 GMT, after earlier hitting a session-high of $1,242.67. The gains follow the metal’s near 4 percent drop last week, its worst weekly performance since October. Gold had taken a hit after strong US jobs data on Friday, falling to its lowest in three weeks, but bullion gained some ground early on Monday on weak data from China.
“Gold coin and currency prices are going to go up from here,” a bureau de change owner told Financial Tribune, “it’s not just the demand for gold coins nearing the year end, risk aversion is high among traders.”
Greenback’s Reversal
The greenback rose 0.56 percent to 34,200 rials by 09:26 GMT on Monday, as the optimism over Iran’s talks with the West faded and equities tanked.
The US currency recovered from a two-month low of 33,870 rials hit on Sunday, following four consecutive days of losses on Ferdowsi Street. The dollar is down 2.1 percent this past month.
Lower price levels also spurred buying in other currencies, pushing the rial lower across the board.
The euro rose 0.64 to 39,100 rials, while Sterling edged up 0.11 to 52,260 rials by 09:26 GMT on Monday.
The Turkish lira was in high demand on Ferdowsi Street. It gained 0.99 percent and changed hands at 14,250 rials in Tehran’s morning trading.
Demand for a hedge drove investors to the safety of gold and foreign currencies as equities tumbled to a fresh 16-month low. Tehran Stock Exchange’s benchmark index sank 0.69 percent to 64,917.50, with banking, shipping and mining shares leading the losses.
“The sentiment in the equity market is bearish and we are anticipating further negative news,” Reza Ghahremani, the CEO of Iranian Tahlil Farabi investments consultancy, told Financial Tribune, “a trio of nuclear negotiations, high interest rates, plummeting crude oil prices are weighing on equities.”
“We expect further declines next week, as the upcoming annual company reports are expected to be poor and shares of oil refiners are expected to open at half their closed price.”
China Sends Gold Higher
Gold edged higher on Monday, as Asian equity markets fell data on Sunday showed China’s trade performance slumped in January, with exports falling 3.3 percent from year-ago levels, while imports tumbled 19.9 percent, far worse than analysts had expected and highlighting deepening weakness in the Chinese economy, Reuters reported.
Largely as a result of the sharply lower imports - particularly of coal, oil and commodities - China posted a record monthly trade surplus of $60 billion.
Asian shares wobbled on Monday after dismal Chinese trade data eclipsed a strong US jobs report, raising concerns about a deepening slowdown in the world’s second-largest economy.
Gold is often seen as an alternative investment to riskier assets such as equities.
Despite Monday’s gains, investor sentiment has taken a hit recently. Hedge funds and money managers cut their bullish bets in gold and silver futures and options for the first time in six weeks during the week to Feb. 3, US Commodity Futures Trading Commission data showed on Friday.
In news from the miners, South Africa’s Sibanye Gold suspended work at its Beatrix mine after nine workers were injured in a brawl between members of two rival unions, the company said on Friday.
The Unexpected Meeting
Investors are became optimistic about Iran’s nuclear talks following Friday’s meeting between US Secretary of State John Kerry and Iranian Foreign Minister Mohammad Javad Zarif, but that optimism subsided.
Kerry met with Zarif for more than an hour on Friday to discuss developments in nuclear negotiations between Tehran and major world powers, which have been at an impasse for months, Reuters reported.
“Their meeting was focused on the ongoing nuclear negotiations and they discussed the recent meetings of the P5+1 (six world powers),” a senior US State Department official said on condition of anonymity to the news agency.
“Secretary Kerry also reiterated our desire to move towards a political framework by the end of March,” the official added. “They agreed to stay in close touch and that they would try to meet again soon.”
The meeting, which included senior European Union official Helga Schmid, took place on the sidelines of the annual Munich Security Conference. Kerry and Zarif have met repeatedly in recent months in an attempt to break the deadlock in the nuclear dipute.
Iran and the United States, Britain, France, Germany, Russia and China have set themselves a March deadline to reach a political agreement ahead of a final nuclear deal by June 30. The agreement would be on limiting Iran’s nuclear program in exchange for lifting sanctions.
Iran and the six powers have twice extended the negotiations after failing to meet previous deadlines for a permanent deal.
