In the late of last solar year, unfortunately, influx of demand for Dollar was dramatically high. As a result, Central Bank of Iran (CBI) proposed three solutions due to this problem in the late February 2018:
1) irregular increment of interest rate by issuing certificate of deposits by the rate of 20% annually which used to be 15% prior to this decision.
2) issuing currency participation bond by the rate of 4% and 4.5% for one and two years maturity respectively.
3) pre-sale of Bahar Azadi gold coins; that the detailed information has been discussed in the following article: “The New Strategies of Monetary Policy in Iran”.
Officials believe that the pre-sale of Bahar Azadi gold coin could not reduce the insatiable demand for it as much as authorities expected in gold coin market. There was lack of routine supply because of time gap between different maturities in pre-sale of Bahar Azadi gold coin and it was one of the main barriers to the success of this plan. As a result, CBI issued the certificate bond for pre-sale of Bahar Azadi. According to officials, 7.6 million coins have been presold since last February which is about 60 tons of gold.
In addition, according to Seyed Mahmoud Ahmadi, secretary general of CBI, special market will be designed for these certificate bonds and they will be traded in commodity exchange. This platform has some merits although some experts believe it would make chaos in the market and selling more gold coins by CBI. The main advantages of this scheme are as following:
- It provides liquidation advantage for these certificate bonds.
- The time gap between different maturities in issuing presale of Bahar Azadi will be eliminated.
- CBI prognosticates that this scheme will make the market more stable.
- It is pretty much safer for holder of these certificates rather than holding physical gold.
- Supplying gold coins will be continued by CBI and by this way, the basic need of making market more stable have been met.
As a matter of fact, CBI has guaranteed the liquidation of these certificated bonds. By this way, there is no difference between keeping certificate bonds or gold coins.
Taken all factors mentioned in the article, this policy sounds interesting as well as more efficient. The certificate bonds on presold gold coins could foster the market and draws the attention of speculators to this option and It will reduce the demand for physical gold coin in the market according to officials.