Iran and Gold

A major regional power. The country with world's largest natural gas supply and the fourth largest proven oil reserves. A heir to the Persian Empire. A theocracy governed by an autocratic Supreme Leader. Iran. What are its links with the gold market?

Iran’s Gold Reserves

The IMF does not report the official gold reserves of Iran. In 2012, the governor of the Central Bank of Iran reported 500 tons of gold above-ground reserves, but they shrank to just 90 tons in 2014, due to their use in barter trade following sanctions. In 2012, Iran’s total below-ground gold reserves were estimated at 320 metric tons.

Iran’s Gold Market

Gold has been part of the culture of Iran for more than 5,000 years. Gold coins are widely bought for private investment purposes and as gifts. Due to limited investment opportunities and a heightened sense of national insecurity, Iranians store large quantities of gold in their homes. In 2004, total gold consumption in the form of jewelry, net bar hoarding and coins, including the recycling, amounted to about 140 tons, ranking Iran as the world’s sixth largest gold-jewelry-consuming country.

Iran’s Economy and Gold

Iran is the world’s eighteenth largest economy by Purchasing Power Parity (PPP). Thanks to its massive gas and oil reserves, it is believed to be an energy superpower. However, its importance to the world economy and capital market is limited. The country is relatively isolated from global financial markets. This is why gold prices seldom react to the developments in Iran (other than oil-related). And vice versa, despite its gold barter trade, Iran’s impact on the gold prices discovery process remains limited. Gold is more sensitive to the American developments, such as fluctuations in the U.S. dollar’s value or in the level of real interest rates.