Consequences of Risky Political and Military Behaviors; Former Central Bank Chief: The Engine of Dollar Price Increase is Ignited

Amid recent military-political developments in the Middle East and a significant jump in gold and currency prices in Iran's free market, the former head of the Central Bank of the Islamic Republic believes that what he calls the 'gold bubble' could be the engine of the 'increase in dollar prices.' According to the website 'Khabar Online,' Valiollah Seif, the former head of the Central Bank, has claimed that the Central Bank can 'neutralize the negative effects of the gold bubble, which could affect the stability of the currency market, through increasing supply.' Seif believes that the only solution to 'reduce and eliminate the gold bubble' is to increase supply, and he states that the issue of the gold bubble 'must be resolved,' warning that if the Central Bank remains indifferent to its growth, it could become the engine for increasing the dollar price. Regarding the price of gold in Iran's free market, some experts and market actors have always acknowledged the existence of a 'gold bubble,' which they currently estimate to be '5 million and 500 thousand tomans' above the actual price of gold. Accordingly, these market actors claim that the 'real number' for the price of gold in the country's free market is about '25 million tomans.' Therefore, some senior economic managers in the Iranian government, like Valiollah Seif, have consistently believed that the 'Central Bank,' as the senior monetary and banking regulator of the country, can neutralize the negative effects of the gold bubble through increased supply, which would subsequently calm other markets like foreign currencies. Since October 7 (the terrorist attack by Palestinian militants supported by the Islamic Republic on areas of Israel) and Israel's attack in mid-October on Gaza, various economic markets in Iran, from the stock exchange to gold and currency, have been affected and faced turbulence each time. Following the escalation of conflicts in the Middle East due to destabilizing attacks by Tehran-backed Houthi militants in the Red Sea and the response of an international military coalition led by the United States last week, this chaotic and accelerating trend in Iran's markets intensified. However, a turning point in the surge of gold and coin prices and the fall of the stock market was the start of missile strikes by the Islamic Revolutionary Guard Corps on areas in Iraq, Syria, and Pakistan, and the reciprocal drone response from Islamabad in recent days, once again demonstrating that any political and military instability has a direct and immediate impact on economic insecurity in Iran. The price of the US dollar in Iran surpassed 54 thousand tomans following the deadly attack from Pakistan. The head of the Tehran Chamber of Commerce reported a 4 billion dollar decrease in non-oil exports. The supply of '700 thousand toman meat' in Tehran; the Ministry of Jihad Agriculture stated it is related to 'upper city.' The supply of meat has decreased again. The prices of oil and gold have increased following the US and UK attacks on the Houthis. Domestic media in Iran have once again warned the government: a 'reasonable policy' must be adopted.