Tehran Bazaar Economic Weekly (May 13-20)
Increasing housing costs, forex and gold weak trades week and much more.
Welcome to this week's Tehran Bazaar Economic Weekly. In the past week, we witnessed significant developments in various sectors of the Iranian economy. The gold market experienced a continued decline, reaching new lows, while global gold prices also saw a downward trend. The forex market observed a negative performance of the US dollar, influenced by factors such as pre-sale of automobiles and encouraging individuals to deposit funds through SMS messages. Additionally, the stock market deviated from the negative performance of other financial markets, raising questions about the causes of these fluctuations. In the commodities sector, the Iranian commodity exchange saw notable events, including housing sales, the launch of saffron futures options, and the sale of KARA vehicles. Moreover, there were significant announcements in trade relations, with Iran's Chamber of Commerce planning to establish a presence in the Russian Federation. Join us as we delve into the analysis and implications of these developments in this week's report.
Gold
The price of gold in the Tehran market has continued to decline, reaching a new low. The price per gram of 18-carat gold has dropped by approximately 18,000 Iranian rials. Global gold prices have also experienced a decline in the past week. Gold's ounce price has dropped by $142.7, falling below the $2,000 threshold. This decline, along with the decreasing value of the Iranian rial against the US dollar, has contributed to the drop in gold prices in Iran.
Analysis: Experts attribute part of the decline to increased selling pressure and a shift of liquidity towards the automotive market and vehicle registration. However, some analysts believe that the current stabilization of prices may continue in the near future. Nader Bazrafshan, the head of the Gold and Jewelry Union of Tehran Province, suggests that prices have reached a relative stability and significant fluctuations are not expected.
Forex
The analysis of the dollar's performance from the 21st to the 28th of Ordibehesht indicates a decrease in the value of the US banknote by 900 Iranian rials. The dollar's return for this week has been negative, with a decline of 3.58 percent. According to traders, the pre-sale of automobiles and the encouragement of people to deposit funds through SMS messages by banks have prompted individuals to sell dollars and deposit their money. This factor, along with others, has contributed to the decrease in the dollar's price.
Markets
This week saw a reversal of fortunes for the stock market, deviating from the negative performance of other financial markets. In the final week of Ordibehesht, gold and the dollar experienced the highest declines in market returns, following the downward trend of the past few days. Some market participants attributed the drop in the stock market to the overall decline in financial markets.
Analysis: Economic experts in Iran consider the decline perspective to be incorrect. They argue that if the stock market decline was the cause of the decline in the dollar and precious metals, why couldn't the thriving financial markets in the second half of last year uplift the stock market? From an economic analysis perspective, the factors leading to the decline in financial markets are political manoeuvres and events occurring outside of the market. Additionally, the second phase of pre-selling automobiles coincided with the last week of Ordibehesht, causing many car buyers to sell their gold, coins, and dollars to secure funds for pre-registration. These factors, coupled with favorable political news such as the potential visit of the Sultan of Oman to Iran, contributed to the decline in the dollar, gold, and coin prices.
Trade
The chairman of Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA), Gholamhossein Shafei, announced that Iran's Chamber of Commerce is set to establish a presence in the Russian Federation by the end of the year. Shafei highlighted the importance of constructive engagement with neighboring countries to foster sustainable development and regional economic links. He emphasized the strong ties between Iranian and Russian private sectors and the potential for further collaboration. Attending the Kazan Forum 2023, Shafei emphasized the significant economic capabilities between Iran and the Republic of Tatarstan, which could pave the way for enhanced bilateral trade.
Analysis: Russia's Chamber of Commerce establishing a presence in Iran demonstrates a significant shift in Russia's economic focus towards the south. This move reflects Russia's strategic intention to expand its influence and economic ties in the region. By prioritizing the establishment of a chamber of commerce in Iran, Russia aims to strengthen its presence and capitalize on the potential for increased trade and investment opportunities in this important market. This marks a notable strategic manoeuvre by Russia to pivot towards the south and solidify its position in the region.
Housing
According to the latest report from the Statistical Center of Iran, the share of housing in the expenditure basket of Iranian households has reached 36%, and for Tehran residents, it has surged to about 50%. This exceeds global standards where housing should account for no more than 30% of household expenses.
Analysis: A higher percentage signifies a decrease in living standards. The increase in the cost of housing has been a significant factor in reducing the quality of life for Iranians, particularly with the ongoing economic instability in the country. The housing costs have been driven up by sanctions shocks, fluctuations in the currency market, increased inflation, and surge in capital demands in the housing sector. As such, the purchasing power of households regarding housing costs has declined. Despite a slight decrease in 2020, economists predict a more challenging situation ahead due to the lack of a clear outlook on housing inflation in Iran.
(Hemat = 1,000 Billion Toman)
(Note: 1 Toman = 10 Rials)
Disclaimer: The views and opinions expressed in these emails are those of the author and do not necessarily reflect the official policy or position of any organization. The information contained in these emails is provided for informational purposes only and should not be taken as investment or financial advice. While the author has made every effort to ensure the accuracy of the information provided, errors and omissions may occur. The author will not be liable for any errors or omissions or any actions taken based on the information provided in these emails. It is the responsibility of the reader to do their own due diligence and seek the advice of a qualified professional before making any financial decisions.
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