Raeisi reaches the gold auction due to the dollar’s burning
According to Iran Gate, after the US dollar price broke the 45,000-toman border immediately after the anniversary of the Islamic Revolution on February 11, we are now witnessing historical and unbelievable record-breaking prices of gold and coins in the market. However, rumors and evidence indicate that the government has adopted a strange and destructive policy to control the limited value of gold.
In the past 40 to 50 days, the government of Ebrahim Raeisi and the Central Bank, led by Mohammadreza Farzin, have been heavily injecting dollars into the foreign exchange market to control the free market exchange rate. Although this extensive currency injection has not yielded results, the dollar is rapidly moving towards the 50,000-toman channel. However, it seems that the government has not learned any lessons from the outcome of implementing this policy.
Now it’s gold’s turn
Reports from the gold and coin market, as communicated by activists and citizens, indicate the government’s efforts to suppress the price of this precious metal temporarily. These efforts have come at a high cost to the government and the Central Bank, and ultimately, ordinary people will bear the cost.
One of the measures taken by the government and the central bank to control the price of gold and coins is the release of over 500,000 quarter coins in the capital market. This measure was taken with the aim of limiting the bubble in the quarter coin market, but evidence suggests that this measure has been ineffective.
Although this policy, as experience has shown, was able to suppress the price of quarter coins in the short term, we are once again witnessing the growth of this speculative asset with the passage of time and the distance from its implementation.
Why did the quarter coin bubble grow excessively?
For a long time, high inflation rates have caused ordinary citizens to refrain from holding their assets in the local currency to prevent their value from depreciating. Due to unfavorable living conditions and the mismatch between wages and the prices of capital goods, low-income groups have limited options to escape the losing edge of inflation.
One of these options is to buy a quarter coin, which is the cheapest among the central bank’s coins. This has led to a significant increase in supply for the quarter coin, overwhelming the market’s ability to respond. The imbalance between supply and demand in the gold market has caused the quarter coin bubble to grow unnaturally. As a result, many market participants have paid special attention to this segment and imposed a new wave of excess demand on it.
A government that does not learn from its mistakes.
All these events have unfolded one after another and ultimately led the government to decide to supply over half a million quarter coins at a much lower price than the market rate in order to meet the excess demand. As mentioned, this move was able to contain the quarter coin bubble in the short term, but it didn’t take long for the price of this coin to resume its upward trend.
At the same time as implementing this plan, the quarter coin was being traded at around 7,800,000 Tomans. However, currently, the price of this central bank coin is fluctuating around 10,000,000 Tomans, which has surprised market participants.
This is despite the belief of many that the government and central bank not only do not have the necessary gold to mint half a million quarter coins, but even if such a possibility exists, such actions would heavily damage the country’s economy and should be avoided. This bitter experience has been repeated many times in the foreign exchange market, and economists have always warned about the damages caused by currency depreciation. But now it seems that the government and central bank not only have not refrained from this destructive act, but they have also resorted to burning the country’s gold reserves.
A repetitive scenario.
Although some believe that the central bank’s action has not been aimed solely at controlling prices, but has been done to attract liquidity. However, government officials, including the president and the finance minister, reject such claims. But considering the country’s conditions and the heavy budget deficit, such a scenario seems unlikely.
But the point here is that such a policy has no more losers, and they are the Iranian citizens who silently witness the loss of their national capital. The government, which has been unable to cover its expenses, is now resorting to any action to conceal its shortcomings in the field of national management. Policies such as currency and gold flooding in the market are similar to a plan recently introduced called ‘productive generation’. It is a repetitive scenario that has had a repetitive ending, and the eternal victim of it is national interests.
Persian
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