Expert: Many in Iran feel safer keeping cash in gold, US dollars

Posted on February 22, 2013

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james-dorseyWhile there is a substantial amount of cash in Iran, many feel it is safer kept in gold and dollars, Senior fellow at Nanyang Technological University’s S. Rajaratnam School of International Studies, James M. Dorsey believes.

The expert was commenting on the fluctuations of currencies at Iranian markets.

Recently Iran has arrested several people charged with hoarding some 3,000 gold coins, while prior to that about 10 more “USD dealers” were arrested on Tehran’s open markets

“Expressions of confidence in gold and foreign currency, particularly the US dollars, are expressions of lack of confidence in the Iranian rial and in a broader sense the Iranian economy,” Dorsey said.

On Feb. 18, Mehr news agency reported citing the Central Bank of Iran that it plans to pre-sale gold coins in near future, also promising to supply the free market with a large amount of US dollars in the coming days.

It is predicted that these moves will result in a sharp fall in the prices of US dollar and gold.

Dorsey belives that while Iran may well be able to shoulder the burden of US, European and international sanctions for some time to come, it is feeling the effects.

“One effect has been the sharp fall in value of the riyal. While there is a substantial amount of cash in Iran, many feel it is safer kept in gold and dollars,” he noted. “Increasing prices for those commodities reflects high demand.”

The government of Iran has set the 28,500 rials per dollar price for the free market but the brokers refuse to trade dollar at the mentioned price.

Critics believe that Iranian government is not controlling the price of dollar at the free market on purpose.

They claim that the government wants to take advantage of selling dollar at the free market in order to compensate its lack of budget.

The government maintains an official reference rate of 12,260 rials to the dollar, but only a limited amount of foreign exchange is available at this rate.

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Posted in: iran economy