Is Currency Flight from Iran Taking the Form of Gold This Time?

Hosseyn Pandarvand, the secretary of the Gold and Jewelry Association, has pointed to the emergence of a new market for currency brokers in Iran, asserting that "gold has now replaced currency, and any amount that was supposed to leave Iran in currency is now leaving in the form of gold." Speaking to the ISNA news agency on Tuesday, May 15, he cited the simultaneous "recession in gold production and a boom in the market for melted gold" as evidence of gold leaving Iran. According to this gold market activist, after the unification of exchange rates, a parallel market has emerged that has been overlooked, leaving the gold market unattended. However, Mohammad Kashti-Arai, a board member of the Gold and Jewelry Union, firmly stated in an interview with the Iran newspaper published in Tehran that a significant volume of gold has not left Iran. Kashti-Arai described reports regarding the illegal export of gold from Iran as stemming from "the heated market of rumors and unofficial news." The Central Bank of Iran recently issued a directive reducing the amount of currency that travelers can take out of the country, allowing each outgoing traveler from air borders to carry only the equivalent of 5,000 euros. The Iranian government and the Central Bank have been implementing a unified exchange rate policy since April 9, as announced by Eshaq Jahangiri, the Iranian Vice President. Following the announcement by the First Vice President, the price of one US dollar was set at 4,200 tomans, leading to restrictions in the free currency market, indicating the government's intention to control transactions in this market and impose limitations on currency outflow and speculation. The gold and coin market has also not been spared from severe fluctuations, and as some market participants say, brokers have replaced currency with gold for capital outflows from Iran. In another interview with the Fars news agency, Hossein Pandarvand provided more details about the gold outflow. Referring to a report from the World Gold Council, he stated, "Last winter, Iranians purchased over 9 tons of gold." He questioned why there is no observed boom in the market if people have bought this amount of gold, ultimately concluding that this volume of gold was not purchased by the public. This gold market activist emphasized that ordinary people do not buy melted gold and speculated that "a gold smuggling flow from Iran has emerged." However, this theory by Hossein Pandarvand has its opponents. Ebrahim Mohammad Vali, the head of the Tehran Gold and Jewelry Union, emphasized in an interview with ISNA that he does not have accurate information and statistics on the volume of gold leaving Iran, but he has speculated that gold outflow could occur amid current market fluctuations. According to the head of the Tehran Gold and Jewelry Union, those who are exporting gold from the country may not even belong to the gold and jewelry sector. Abadollah Mohammad Vali, a member of the Gold and Jewelry Association, also opposes the theory of gold outflow from Iran and stated in an interview with the Iran newspaper that "exporting gold from Iran is not economically viable." According to this member of the Gold and Jewelry Association, gold smuggling occurs when there is a significant price gap between the domestic and foreign markets, which, due to high prices in the Iranian market, makes this issue economically unfeasible. Mohammad Kashti-Arai, the former head of the Gold and Jewelry Union, also confirmed that prices in Iran have been higher than in other countries in recent months, and for this reason, he considers gold outflow to be economically unviable. In recent days, a report on the Central Bank's performance in the pre-sale of coins has been published, showing that the Central Bank has pre-sold 7 million and 650 thousand coins worth 10 trillion and 900 billion tomans. According to Kashti-Arai, estimates suggest that about 200 tons of gold are held in homes and in the hands of the public, which will increase with the delivery of pre-sold coins. Amid rising tensions and increasing concerns about the future, the desire to buy gold and currencies from other countries to preserve capital and purchasing power in the future is increasing. Since the announcement of the unified exchange rate policy by the government, which was accompanied by a halt to currency trading in the free market and security crackdowns in the currency market, the gold and coin market has also experienced severe fluctuations.