All the efforts of the managers of Iran’s Central Bank (CBI) to control the price of gold ‎and coins have failed to produce results. The price of these items has been growing so ‎rapidly in the Iranian market that many observers say the growth is at unprecedented ‎levels.‎

Even the daily flooding of coins into the market through their sale by the Central Bank ‎and the Kargoshai bank have not changed the trend. Even threats to those playing this ‎field, have not led to results. The main cause for this is the increase in price of an ounce ‎of gold in the international markets. But a closer look reveals that other domestic factors ‎have been more influential in this steep price rise.‎

Published media reports indicate that the concern that Iranians have because of ‎intensification of the nuclear confrontation between Iran and the rest of the world, the ‎meaningful trips that American officials have been recently making to the countries of ‎the Middle East region, and the heightening rhetoric between Iran and the West have ‎reached new levels. Such concerns are more apparent as the deadline for Javier Solana’s ‎report and that of the IAEA regarding Iran’s nuclear dossier approach their deadlines, in ‎November. The recent trends in the Iranian liquidity markets as money flows to literally ‎any market can also mean the end of the market stability in the country, which impacts ‎the housing, and the gold and coin exchange market. At the same time, the inability of the ‎Iranian market to absorb the large available capital in the national economy and the ‎meager impact of the sale of government bonds in controlling the rapid liquidity trend has ‎directed this available capital towards the gold and coin market in Iran.‎

Analysts believe that the situation in the gold and coin market are representatives of the ‎state of the whole economy, even though the Central Bank of Iran has tried to artificially ‎control the supply of coins through the monopoly that it exercises. But the international ‎gold trends and the domestic issues have in fact frustrated the efforts of the CBI.‎

The importance of the gold and coin market in Iran lies in the fact that the exchange ‎value of these commodities is the criteria that the government uses to measure price ‎changes in other markets, and it is used as the criteria to measure inflation. So the new ‎record price of 210,000 Rials for a Bahar Azari gold coin is the market is not something ‎that government economic planners can easily ignore.‎

The trading of bonds in the market causes the flight of capital and thus shrinking the ‎liquidity market which translates into a complete failure of the government’s economic ‎policies and efforts to control inflation.‎

This trend and others such as the unstable price of oil in the international market, the ‎falling value of the Dollar, the growing tensions over Iran’s nuclear policy and the rising ‎value of the metals market in the world, including gold, make it likely that the price of ‎gold in Iran will continue to rise as rapidly as it has in the recent past. ‎

The chaos in the gold and coin market in Iran in recent weeks has led to more speculative ‎activities in the market to levels that CBI officials have issued several warnings and ‎complaints to stop the speculators from further disrupting the market. In one of its latest ‎announcements the CBI said that the price of gold that it sells has not changed over the ‎last few years. The statement also warned that if speculators continue to increase the ‎price of gold and coins provided by the CBI, their trading licenses may be subject to ‎cancellation. ‎

Mohammad Keshti-Arai, a senior manager at the Gold and Jewelry Union of Iran told ‎Mehr news agency, “As of Wednesday, all traders of gold and precious stones must ‎purchase their gold at the current market value, regardless of the date when the coins ‎
were minted.”‎

Prior to him, Mohammad Azad, the head of the Trade Council (Shoraye Asnaf) told ‎ISNA news agency declared that the reason for the existence of two prices for gold in the ‎country were because the minister of labor had initiated the creation of a Coin Bank ‎‎(Bank Seke). He singled out Refah Bank’s supply of coins to be the principal cause of the ‎disruption of the gold market. “This is why we have written to the CBI and requested that ‎measures be taken to end the two-price system of gold. The bank in turn issued a ‎statement in this regard,” he said. ‎

The unprecedented increase in the market value of gold indicates the unstable market ‎situation in the country and the hype that exists among small investors who do not know ‎in which market to invest their capital so that the 17 percent inflation rate does not eat up ‎their investments.‎