Weak monetary, fiscal and exchange rate policies in recent years coupled with the payment ofhigh interest ratesto Iranian bank depositors have all acted to cause the liquidity rate to spike to levels that have spurred dramatic growth in asset markets such as hard currency, gold coins and real estate. Iranian stock exchanges have been the only markets thathave been neglected by investors, even as the fundamentals in the Tehran Stock Exchangetell of rosy days to come.
The interest rate cut by the Central Bank of Iranin September amid President Donald Trump's repeated threats to withdraw from the nuclear deal which he effectuated May 8 are among the catalysts that contributed to further turbulence in the foreign exchange and gold coin markets in Iran.
But as gold coin prices keep hitting new highs, experts say valuations are deviating deeply away from intrinsic values and thus indicating the formation of a bubble. For instance, the US dollar exchange rate, which is commonly applied to calculate the value of gold coins, is priced at a premium far above the rate of the greenback on the now blacklisted free market. While the US dollar trades for around 71,000 rials in the unofficial market, gold coins are sold for around 25 million rials. In this valuation, the dollar is calculated at a rate of75,000rials. This amounts to$352 at the first rate, and $333 at the second, but $565 at the official rate. This shows that investors have turned to thegold marketas a safe haven to preserve the value of their money in the absence of a functioning free foreign exchange market due to severe penalties imposed by the authorities on both sellers and buyers.
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