Raisi’s Journey from Dollar Burning to Gold Auction
Raisi’s Journey from Dollar Burning to Gold Auction: According to Iran Gate, after the US dollar’s price in the free market immediately broke the 45,000 tomans barrier following the anniversary of the Islamic Revolution on February 11, we are now witnessing unprecedented and unbelievable records in gold and coin markets. However, reports and evidence suggest the government has adopted a strange and destructive policy aimed at temporarily and narrowly controlling gold’s value.
In the past 40 to 50 days, Ebrahim Raisi’s government and the Central Bank, under the guidance of Mohammadreza Farzin, have been heavily injecting dollars into the currency market to curb the free market rate. Although this widespread currency injection did not succeed, and the dollar is rapidly moving towards the 50,000 tomans channel, it seems the government has not learned from the outcome of this policy.
Now It’s Gold’s Turn
Reports from the gold and coin market by activists and citizens indicate the government’s effort to temporarily suppress the price of this precious metal, an effort that has cost the government and the Central Bank significantly, and ultimately, ordinary people will bear the cost.
Among the government’s and Central Bank’s measures to control gold and coin prices is the release of over 500,000 quarter coins in the capital market. This measure aims to restrict the inflated bubble of the quarter coin in the market, but evidence suggests this action has been ineffective.
Although this policy, as experience has shown, managed to suppress the quarter coin’s price in the short term, once the implementation ended, we again witnessed the growth of this coin’s bubble.
Why Did the Quarter Coin’s Bubble Grow Excessively?
For a long time, high inflation rates have led ordinary citizens to avoid holding onto their rials to prevent the devaluation of their assets. Due to unfavorable living conditions and the mismatch between wages and the prices of investment goods, low-income groups have limited options to escape the sharp edge of inflation.
One of these options is buying quarter coins, the cheapest among the Central Bank’s coins. This situation has led to a significant increase in demand for quarter coins, and the market could not meet this demand. The imbalance between supply and demand in the gold market caused the quarter coin’s bubble to grow beyond its natural limit, prompting many market players to pay special attention to this market segment and impose a new wave of excess demand on it.
A Government That Doesn’t Learn
All these events combined, ultimately leading the government to decide to release over half a million quarter coins at a much lower price than the market rate to meet the excess demand. As mentioned, this action managed to restrict the quarter coin’s bubble in the short term, but it wasn’t long before the price of this coin resumed its upward trend.
At the time of implementing this plan, the quarter coin was trading at about 7.8 million tomans, but currently, the price of this Central Bank coin is fluctuating around the 10 million tomans range, surprising market players.
Meanwhile, many believe that the government and the Central Bank not only lack the necessary gold to mint half a million quarter coins, but even if such a possibility were available, actions like these inflict heavy blows on the country’s economy and should be avoided. This bitter experience has been repeated many times in the currency market, and economists have always warned about the damages caused by currency injections. However, it seems the government and the Central Bank not only haven’t stopped this destructive act but have moved from dollar burning to squandering the country’s gold reserves.
A Repeated Scenario
Although some believe this Central Bank action was not only aimed at controlling prices but also at absorbing liquidity, Raisi’s government officials and Farzin deny such claims. However, given the country’s situation and the government’s heavy budget deficit, such a scenario doesn’t seem unlikely.
The point is that such a policy has only one major loser, and that is the Iranian citizens, who silently and quietly witness their national assets being squandered. A government that is unable to meet its expenses now resorts to any action to cover its shortcomings in macroeconomic management. Policies like currency injection and gold injection in the market are similar to a plan recently proposed under the name of ‘productivity enhancement,’ a repeated scenario with a repeated ending where national interests are the perpetual victim.