Iran Places Major Focus on Gold Amidst Trump Turmoil | Business and Economy News

Tehran, Iran – In recent months, Iran has significantly increased its gold imports as it braces for further challenges resulting from the United States’ “maximum pressure” policy.

For over a decade, Iran has sought refuge in gold as a safe investment, navigating through relentless economic turmoil aggravated by sanctions related to its nuclear program and regional ambitions.

Following the death of his predecessor in a helicopter accident, President Masoud Pezeshkian, who assumed office last summer, has escalated these gold imports to counteract pressures from U.S. President Donald Trump.

As of January 19, marking the end of Dey, the 10th month of the Iranian calendar, Iran had imported at least 81 metric tonnes of gold bullion, according to the customs administration.

This amount reportedly exceeds 300 percent year-on-year in terms of value and 234 percent in weight compared to the same period last year.

In late February, newly appointed customs chief Foroud Asgari announced that gold imports for export purposes had surpassed 100 tonnes, although he did not provide further details.

This represents a more than three-fold increase from the previous year’s total of 30 tonnes.

Central bank chief Mohammad Reza Farzin noted in December that 20 percent of the nation’s foreign currency reserves have now been converted into gold, placing Iran among countries with the highest gold-to-foreign exchange ratios globally.

Last month, Mohammad Ali Dehghan Dehnavi, head of Iran’s Trade Promotion Organization, mentioned that despite a negative trade balance this year, much of it was attributable to increased gold imports.

Iranian officials have not disclosed the sources of their gold imports or what has been exported in exchange.

Some reports suggest Iran has acquired a portion of its gold from Russia in exchange for suicide drones, although Iranian officials have refuted these claims, stating that they exported only some drones to Russia prior to the onset of the Ukraine war.

The West maintains Iran sold its Shahed drone to Russia for the war in Ukraine [File: Brian Snyder/Reuters]

Gold everywhere

The Iranian government’s shifting focus towards gold is accompanied by efforts to address budget shortfalls through significant tax increases.

For years, Iranians have been safeguarding against the devaluation of their national currency by investing in foreign currencies and various gold products, particularly coins issued by the central bank.

In recent months, authorities have heavily promoted gold purchases.

A variety of services and applications have emerged, accompanied by widespread advertisements encouraging citizens to convert their savings into gold for as little as $1 or less.

However, not all of these services can verify their gold reserves, prompting officials to periodically caution the public to buy only from reputable vendors to avoid deception.

Additionally, superstition played a role, with thousands lining up outside gold shops last August, believing that purchases made on the 13th day of the Islamic month of Safar would bring luck.

Women check the display at a jewellery shop in the old market of Yazd, Iran, on July 3, 2023 [Atta Kenare/AFP]

Those purchasing gold this year have seen their investments grow, as the rise in gold value—driven by global demand and domestic instability—has outstripped Iran’s inflation rate of 35 percent.

The central bank has conducted a series of pre-sales for new gold coins, with some having delivery times extending up to six months and being sold at prices above their intrinsic global value.

The central bank also planned to introduce new gold certificates before the Iranian calendar year ends on March 20 but has postponed the initiative until next year.

The monetary authority has yet to release the terms for issuing these state-backed certificates, noting only that the delay is due to “the economic situation at year-end and the stock market”.

The TEDPIX, Tehran Stock Exchange’s primary index, reached record highs in January but has faced considerable volatility as U.S. and Israeli threats of military action against Iran persist alongside worsening economic conditions.

What’s behind the gold rush?

Following Iran’s exclusion from the global payment framework and significant restrictions on access to foreign currencies, gold has become increasingly favored by authorities to reduce reliance on the U.S. dollar and serve as a valuable medium for trade.

Most of the imported gold is believed to have been transported through Tehran’s Imam Khomeini International Airport to mitigate potential logistical hurdles of moving large quantities.

The government also aims to bolster local gold production over the coming years, which currently plays a limited role due to inadequate investments in exploration and mining.

However, while the strategy to increase gold imports may provide short-term benefits for an economy under severe strain, it faces limitations in addressing rampant inflation.

Iranian gold coins [Photo by Naser Jafari/Tasnim News/AFP]

Economist and market analyst Mehdi Haghbaali shared with Al Jazeera that the central bank’s gold coin sales to the general public are unlikely to yield significant results.

He attributed the persistent devaluation of the national currency not solely to excessive money supply growth—which has fueled continual inflation—but also to geopolitical instability.

“By selling gold coins, the central bank supposedly aims to signal its confidence and substantial reserves of foreign assets—be it currency or gold,” he commented.

“However, even if that is the intention, these auctions will ultimately be ineffective. The public is well aware of the government and central bank’s challenges, including the considerable fiscal deficit and predicted trade issues under the new U.S. administration. Therefore, regardless of how much gold the central bank sells, it will not alter public perceptions, leaving an almost negligible impact on pricing.”

Haghbaali emphasized that genuine improvements in macroeconomic and political conditions are essential for a meaningful effect on prices, rendering gold sales an “almost futile use of energy and resources.”

Missing gold?

The vast amounts of imported gold and the associated ambiguity due to sanctions have prompted increased allegations of misconduct.

Independent Iranian journalist Yashar Soltani recently claimed that over 61 tonnes of gold are “missing” and have not entered the marketplace.

He highlighted that gold coins are being sold at inflated prices, reinforcing enduring accusations from local politicians and economists that successive Iranian governments manipulate rates for short-term benefits.

In response, the central bank issued a brief statement denying these claims without providing details, announcing plans to pursue a legal case against the journalist through the judicial system.

State-run media quickly defended the government’s approach towards gold, with IRNA arguing that selling portions of the central bank’s gold reserves is a logical move to ensure liquidity under sanctions.