Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Iranians Turning to Gold as a Currency Crisis Grips the Nation

  by    0   0

With hyperinflation gripping Iran and sanctions strangling the economy, Iranians are beginning to turn to gold to make everyday transactions, most notably to pay their rent.

The Iranian rial has depreciated rapidly since the US announced its withdrawal from the 2015 nuclear deal and the reimposition of economic sanctions. After the US formally announced it was pulling out of the deal in May, the exchange rate peaked at around 45,000 rials to the dollar. But that official rate was only available to well-connected bankers, importers and businesses. Average Iranians were paying twice that.  By July 29, money-exchangers in Tehran were charging around 100,000 rials for one dollar. Within 24 hours, it increased to 110,000 rials to the dollar.

With inflation rapidly spiraling out of control, Iranians have turned to gold. According to Bloomberg, bar and coin sales tripled to 15.2 tons in the second quarter of this year. That’s the highest demand for the yellow metal in four years. Novin Investment Bank analyst Massoud Gholampour said Iranians are preparing for an economic crisis.

Demand for physical gold is very high and has been as the currency’s been weakening. People want to invest in something that’s safe if they think that a crisis may be on the way.”

 

According to a report by the Middle East Eye, Iranians have traditionally saved gold coins for major purchases such as weddings, but they are increasingly turning to gold for more mundane transactions. Some landlords have started collecting rent in gold instead of rials. Rents have gone up as purchasing power has failed. As the Middle East Eye put it, “The downward spiral of the rial has led some landlords to try to safeguard their income by turning to gold.”

Esamil Jalali owns rental property in an affluent northern Tehran neighborhood. He now charges his tenants two gold coins per month for a 95-square meter apartment. With the rial depreciating so rapidly, he’s turned to gold to protect the value of his rental income.

I know that many may not be able to afford it, but when I see that the currency I may get from my tenants would have less value compared to the previous month, then that leaves me with no choice. If I continue to rent out my apartment in return for rials, then I would face financial loss.”

As the economic situation continues to deteriorate in Iran, the use of precious metals for barter will likely increase. Those who have invested in gold and silver will fare much better as the crisis deepens.

People often turn to barter, gold and silver in the midst of an economic crisis.

As the inflation rate approached 1 million percent, Venezuelans were forced to turn to barter just to survive. As Reuters report put it, “The rise of barter exchange, amid hyperinflation and a dearth of cash, is a reflection of how the once-prosperous country is reverting to the most rudimentary of mechanisms of commercial exchange.”

Barter also spread through several European countries after irresponsible government spending led to a debt crisis and bailouts a few years ago. In 2012, Spain saw a noticeable increase in barter exchanges, as Spaniards sought alternative ways to do business with each other in an economy on the verge of a major debt crisis. Greeks also became fluent in barter and alternative means of trade when their financial system effectively collapsed in 2010. Greeks had their access to cash severely restricted during their country’s recent economic turmoil. It got so bad, a robust barter economy developed out of sheer necessity, as everyday Greeks had to find ways to cope with cash withdrawal limits and currency shortages.

More recently, Indians faced a major shortage of cash, with as many as 90% of ATMs in some regions of the country running completely out of currency. The cash crisis stemmed from a policy of demonetization the Indian government launched.

The key to weathering a currency crisis, hyperinflation and economic chaos is to be prepared. Once the meltdown happens, it will become much more difficult to buy precious metals. For more information on barter metals and preparing for an economic crisis, visit the SchiffGold barter metals page.

WhyBuyGoldNowBanner.070815.590

Get Peter Schiff’s most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

10% Gold in Your Investment Portfolio; Get Ahead of the Crowd

Last week, Independent Strategy head David Roche said gold could hit $2,000 by the end of the year. And Rosche isn’t the only big name in the investment world who sees a shiny future for the yellow metal. Mark Mobius recently said he thinks gold could push above $1,500 as central banks move interest rates […]

READ MORE →

World Gold Council: Gold Could Shine as Heightened Risk Meets Easy Money

Gold Flows into ETFs for Second Straight MonthGold will likely shine over the next six to 12 months as heightened risk meets easy money — this according to the World Gold Council’s mid-year outlook. Gold ranked as one of the best-performing assets through the first half of 2019, beaten only by stock markets – which have also been supported by the turn […]

READ MORE →

Gold-Backed ETF Gold Holdings Chart Biggest Increase in Seven Years

Holdings in global gold-backed ETFs surged in June, charting their largest increase in seven years driven by increased geopolitical uncertainty, fear of an economic slowdown and widespread anticipation of looser central bank monetary policy. Globally, gold holdings in ETFs rose sharply by 127 tons last month, according to the latest data from the World Gold […]

READ MORE →

Poland Gobbles Up Gold, Plans to Bring It Home

Poland has added 100 tons of gold to its reserves through the first half of this year and plans to move at least half of its hoard from England to National Bank of Poland vaults in Warsaw. We’ve reported extensively on gold purchases by central banks, particularly China and Russia as those countries seek to […]

READ MORE →

China Adds to Gold Hoard for the Seventh Straight Month

For the seventh straight month, China added a significant amount of gold to its official reserves. The People’s Bank of China’s gold hoard grew another 10.3 tons in June, according to information released by the bank. Over the last seven months, the Chinese have increased their gold reserves by just over 84 tons.

READ MORE →

Comments are closed.

Call Now