The CPM Group expects demand for gold to rise in the wake of US sanctions against Iran. According to the Middle East industry consultant, oil versus gold transactions are likely to experience a new economic situation.
The US recently terminated the nuclear agreement with Iran and announced new economic sanctions against the country. This policy can have an impact on the gold market, according to a recent Forbes report.
US citizens and US companies are prohibited from trading with Iran in the course of the sanctions. This also applies to financial institutions that cooperated with US banks. Since the international financial system is strongly networked, practically no major bank can intervene in business with Iran.
The New York-based CPM Group, a consulting, analysis and service company in the raw materials industry, explains: „The US government is trying to plug the loophole that was extensively used in the last round of sanctions. Unfortunately, it is unlikely that the US government will succeed in this subgoal.“ The CPM Group sees gold as the reason. The precious metal has a long history as a substitute currency and Iran and its people have long used gold as a store of value and as a means of circumventing sanctions.
„One of the historical achievements of gold is its ability to be used in all kinds of locations,“ says CPM founder Jeff Christian. This means that even if payments cannot be made through the banking system, gold can still be used as a means of exchange. The Iranians are already using gold to protect their assets. The domestic currency Rial, for example, is already highly inflationary and has depreciated considerably against the US dollar. Gold reporters recently reported on this development (Iranians are fleeing into gold). As a result, demand for gold in Iran will rise sharply once again in the wake of the sanctions.
The biggest gold price factor, however, is Iran’s ability and intention to sell oil for gold. Even before 2015, Iran had been one of the largest markets for gold. At that time oil was sold for Turkish lira, which was then used to buy gold, Christian explains. He believes that Iran is now trading oil directly for gold with its remaining trading partners. His conclusion: „The result is that the measures announced by the US against Iran on the 8th are likely to further stimulate demand for gold in Iran“. This is expected to have a correspondingly positive impact on the price of gold.