Iranians turning to Gold as inflation runs rampant

Iranians are turning to gold as sanctions and government policy destroy their currency.

The average inflation rate in Iran has climbed to over 40 percent (based on CPI) on an annual basis. According to an AP report, gold has become the most trusted hedge against this rapid devaluation of the rial.

The rapid increase in the local gold price reflects the inflationary environment. Last week, the price of a gold coin in Iran exceeded 1.2 billion rials for the first time in the country’s history.

Still, people are buying. A gold and jewelry merchant told the AP he has never seen such high demand for gold.

“In the past two weeks, I’ve sold 6 kilos (13.2 pounds) of gold to ordinary people — a new experience for me. People are rushing to buy because they fear their savings will lose value.”

Wage earners are quickly exchanging their rapidly devaluing fiat currency into real money. A grandfather told the AP that he sees gold as “the best way to preserve value.”

“Whenever I make money, I turn it into gold,” Behzad Rashvand said.

Audio equipment salesman Hamid Safari has adopted a similar strategy.

“Whenever I have enough money to save, I immediately convert it into gold. Throughout history, gold has not only held its value but also increased in worth. We should learn from history if we want to build a better life.”

Fatemeh Parsa invested her inheritance in real estate. Now she regrets that decision.

“With global gold prices rising, I sometimes wish I had bought gold instead — my assets would have grown much more than real estate. Now, it seems that investing in silver could be valuable, especially for my children’s future.”

Some Iranians turned to cryptocurrency to keep ahead of inflation, but that has proved problematic because the U.S. government has cracked down on Iranian crypto sellers. The U.S. slapped sanctions on two Iranian financiers, along with more than a dozen individuals and firms in Hong Kong and the UAE, for coordinating the purchase of $100 million in cryptocurrency that was used to facilitate oil sales by the Iranian government.

Iranians have not only turned to gold as an inflation hedge. They value its portability. Many Iranians fled Tehran to the countryside during the 12-day war with Israel. The influx of people overwhelmed rural infrastructure, and ATMs quickly ran out of cash or broke down.

Gold solves this problem because it is easy to transport. According to the AP, people have learned from history.

“Many who fled the cities during the 1980s Iran-Iraq war took whatever they could with them. And in the 1979 Islamic Revolution, those allied with the shah and his government fled Iran with whatever they could carry. Back then, the rial hit an all-time high of 120 to $1, which saw money-changing shops inundated and people buying gold, jewelry, rugs and other assets to spirit abroad.”

A 49-year-old fabric importer told the AP he is liquidating his assets and turning them into foreign currency and gold.

“In an emergency, I need to be able to carry my assets with me if I have to leave.”

Iranians are following a universal strategy. When government money fails and the financial system breaks down, they turn to gold. For instance, Indians used their vast gold savings to make ends meet during the COVID lockdowns, and Turkish citizens are currently gobbling up gold to shield themselves from their government’s relentless devaluation of their money.

Americans aren’t facing the kind of borderline hyperinflation currently gripping Iran and Turkey, but their government is also devaluing their currency by design. Keep in mind that inflation is the plan. The stated objective is to erode the purchasing power of the dollar by 2 percent every year. Currency depreciation is considered a feature of a fiat monetary system – not a bug.

Whether your government is stealing your money’s purchasing power slowly or all at once, the only way to protect your wealth over time is to exchange your fiat money for real money that can’t be printed – gold and silver.