Iran government emerges victorious regarding gold, currency fluctuation

By  Trend

The Iranian government is the party that manages the fluctuation in the gold and currency prices and it has emerged victorious in its own game, Mehrdad Seyed Asgari, a Norway-based Iranian financial analyst, told Trend.

To understand that, we need to take into account the liquidity accumulation in the Rouhani administration, Asgari noted.

"Statistics released by the Central Bank of Iran [CBI] show that the Rouhani [11th] administration has added 175.756 trillion rials [the USD at about 42,000 rials] each month. This is while in the 10th administration the amount stood at 57,762 billion and in the 9th administration it stood at 26,966 trillion."

"According to the CBI, the amount of liquidity in the fiscal year 1395 [which ended March 20, 2017] stood at 1.253 trillion rials. The share of the Rouhani administration was 62 percent, that is, during the 44 months it was in office, the administration added 773 trillion rials to Iran’s liquidity," Asgari noted.

This is while the shares of the 10th and 9th administrations were 277 trillion and 129 trillion rials respectively, according to Asgari, who concluded that the 11th administration’s contribution to liquidity in 44 months was twice those of the 10th and 9th administrations put together.

He then pointed to budget deficit in the Rouhani administration, saying five months into the current fiscal year, the government exhausted its budget, plus facing 470 trillion rials deficit.

"Simultaneously with the end of the Christian year, which is naturally accompanies by increase in foreign currency rates, inflated the prices of gold coins and currencies and at the same time distributed large amounts of them," Asgari said.

"This means, when people are dissatisfied with the growing rates of gold and currencies, they rush to these markets and buy these capital goods at higher prices than before. Thus, the government will skim over its budget deficit while people will not be demonstrating because they feel glad that they have bought US dollars and gold coins, thinking they have preserved the value of their assets.

"Now it is to be mentioned that during the five days of the governmental gold coin distribution, 20,000 coins were sold at Kargoshaee Bank in a section of an hour.

"Now it is time for the government to fix its deficiency problem. This is when it applies its own mechanisms to reduce tension in the market, i.e. by reducing demand at the same time as currency and gold rates stay as they are, or rather go down a little. Then the government claims it has controlled the market. But in fact, the large amounts of money spent to buy US dollars and gold coins now have less value. The money created by the government is practically vanished and the government has been able to emerge victorious from this game and hardly anybody knows the secret to this rise and fall of prices."