Iran is selling dollars to defend the rial while many savers are buying dollars and gold to protect their savings.
Reuters reported that the dollar traded around 2.688 million rials on October 3. State banks began selling up to $2 billion to support the currency. Inflation exceeded 70%, and the rial had lost more than half its value over the previous year.
We see a difficult problem behind that intervention: making dollars available and making people comfortable holding rials are different tasks.
Additional dollar supply can ease an immediate shortage and help settle a disorderly market. But a household deciding where to keep its savings is also judging what happens after the intervention ends.
If people expect further depreciation, a temporarily better exchange rate could become an opportunity to convert more savings. That is a possible response, rather than evidence that this particular operation has already failed.
The IMF’s guidance on currency intervention makes the broader constraint clear: intervention can help manage shocks, but it needs support from monetary and fiscal policies. Selling foreign currency cannot carry the entire burden of restoring confidence.
For gold, this explains a source of demand that starts with the saver’s existing money. Someone worried about confidence in fiat currency may buy metal without having a strong opinion about next month’s dollar gold price.
Direct ownership of physical gold reduces dependence on the domestic currency, although price volatility, dealing costs and secure storage still matter.
Our test of a lasting recovery would therefore go beyond a stronger rial quote. We would look for evidence that savers are willing to retain more of their wealth in rials after official dollar sales subside.
A currency rescue becomes durable when people choose to hold the currency again.
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