- Gold Demand Will Rise Before Sanctions
- The Selloff in EM Currencies has Yet to Buoy Gold
- The Demand for Safe Haven Assets will Continue to Rise
Despite the recent dip in gold prices, gold demand is set to rise ahead of sanction in Iran. The decline in currencies in the Middle East, Eastern Europe and Russia are increasing demand for precious metals as people within these countries scramble to exit their currencies and rush into a safe haven asset. With sanction on Iran likely coming soon, now that the White House has pulled out of the Iran nuclear agreement, demand for gold from the Middle East is likely to rise.
Gold Supply Could be Curtailed
Sanction from the United States can generate trading issues as counterparties that normally deliver precious metals are cut off by sanction from the United States or Europe. Recently the London Bullion Market Association said that it had suspended a Russian metal processing plant from gold and silver deliveries due to ownership issues. Ekaterinburg Non-Ferrous Metals Processing Plant is now caught in the cross-hairs of sanctions, and has been taken off the good delivery list. This list covers all refiners and processors that are acceptable in the London Bullion market. Companies that dealt directly with this processor will no longer be able to send or receive metal. The refiner, is controlled by Renova Group which was sanctioned by the U.S. in early April.
Russia is a major producer and refiner of gold. It produced more than 270 tons of gold in 2017. The Russian central bank, which holds large reserves of gold bullion, purchased 224 tons of gold in 2017, while Russian consumer demand totaled 40 tons of gold.
Geopolitical Issues Provide Necessity for a Safe Haven
The drop in Iran’s, Turkey’s and Russian’s currency relative to the U.S. dollar will likely kick off a rise in the demand for gold and the greenback. The Turkish Lira has come under pressure in recent weeks following comments from Turkish President Erdogan hold told investors that he would take greater control of the countries monetary policy following the countries elections. Turkish investors immediately purchased U.S. dollars and over time will convert their dollars into precious metals.
Iran’s currency has also been hammered. With sanctions coming from the United States in the near future, the demand for gold will likely rise into the summer. Historically Iran has increased its precious metals demand ahead of sanctions.
Joints Plan of Actions Precious Metals Sanctions Relief
Sanction will likely hit precious metals, but consumers will not be cut off completely. The JOPA agreement extends sanction relief for the life of the JCPOA relief agreement. Those who are foreign personals who receive relief will benefit the most as the will no longer be discouraged by EU or UN sanctions or secondary sanctions from the U.S.
The selloff in emerging market currencies such as the Iranian Rial, the Turkish Lira and the Russian Ruble, has driven investors into the greenback, which has weighed on gold prices. Ahead of further sanction investors will likely convert their dollars to gold, to offset a decline in the greenback. Demand for the yellow metal should accelerate ahead of sanctions, as investors look to lock in a safe haven asset like gold. If you are interested in purchasing gold bullion ahead of these sanctions, call Treasure Coast Bullion t 800–982–6105 or click on this link to get access to your Investment Kit.
Treasure Coast Bullion Group
Read more by Treasure Coast Bullion Group, Inc - Staff Writer