Arman Zarei: The US mid-term elections were not just a political contest between Democrats and Republicans. The result of this election was also important for the financial markets; Especially, the change in the composition of the Congress can affect the implementation of Donald Trump’s plans in the remaining two years of his presidency. The victory of the Democrats in both chambers has changed the political equation in Washington, and now the markets have to adapt to the new conditions.
But what is more important for the Iranian market is the possible consequences of this development on American foreign policy and the future of relations between Tehran and Washington. In an economy where political expectations play a significant role in currency and gold market volatility, even news about the changing balance of power in the United States can influence traders’ behavior.
Of course, one should not expect an immediate change in American policies from the results of the elections. The composition of Congress alone does not determine the course of sanctions and foreign relations, and the decisions of the White House, regional developments and the conditions of negotiations also play a role in this equation. However, markets usually do not wait for all the consequences of a political event to be known and reflect some of their expectations before the next developments in prices.
The dollar retreated in response to developments in the United States
The first significant reaction in the domestic market is related to the currency market. The free dollar reached 269 thousand 90 tomans with a decrease of 2,600 tomans in trading on Wednesday, November 13. The drop in the price of the dollar happened in a situation where the currency market is still one of the most sensitive domestic markets to political news and developments related to foreign relations.
The drop in the price of the dollar can be analyzed from the perspective of changing traders’ expectations. Part of the market participants may evaluate the result of the US election and the narrowing of the Trump administration’s maneuvering power in Congress as a factor to moderate political expectations. In such a situation, there is a possibility of a decrease in precautionary demand and the withdrawal of buyers who entered the market with concerns about the future.
However, the drop of 2,600 tomans alone is not enough to talk about a change in the market trend. In addition to political news, Iran’s currency market is affected by the supply and demand of currency, central bank policies, inflationary expectations and foreign trade conditions. Therefore, the continuation of the decline in the price of the dollar depends on whether the new expectations are maintained in the trading of the coming days.
In fact, the main question of the currency market is whether the result of the US election can reduce the severity of traders’ political concerns or whether this price reduction is just a short-term reaction to a political news. The answer to this question should be sought in the behavior of the dollar in the coming days.
Gold between the drop of the dollar and the growth of the global ounce
In the gold market, the situation is slightly different. The last registered rate is 25 million 772 thousand 200 tomans per gram of 18 carat gold. 24 carat gold has also reached 34 million 359 thousand tomans and the price of Tehran is at the level of 111 million 640 thousand tomans.
In the global market, gold has shown a different reaction to the developments of the American elections. The global price of an ounce increased on Wednesday and crossed the four thousand dollar mark. The weakening of the dollar index and the change in investors’ expectations about the economic policies of the American government were among the factors that played a role in this process.
Here, Iran’s gold market is facing two different variables; On the one hand, the increase in the global ounce price and on the other hand, the decrease in the dollar rate in the domestic market. The first can raise the price of gold and the second can act in the opposite direction. For this reason, it is not possible to judge the path of the gold price in Tehran just by observing the growth of global gold.
In fact, the domestic gold market is at a point where the effect of its two main variables must be measured side by side. If the growth of the ounce continues, but the dollar remains on the downward path, the impact of these two factors on the final price of gold will be decisive.
Imami coin in the range of 264 million tomans
In the coin market, the last price of Imami coin has reached 264 million tomans. The old design coin is traded at the rate of 252 million 500 thousand Tomans, and the half coin and quarter coin are priced at 139 million 300 thousand Tomans and 75 million 500 thousand Tomans, respectively. The gram coin is also in the range of 37 million tomans.
The coin is among the assets that are simultaneously affected by the dollar rate, the global price of gold and inflationary expectations. For this reason, political changes usually affect this market in several ways. In a situation where the dollar decreases, part of the upward pressure on the price of the coin is discharged; But the growth of the global ounce can offset this effect to some extent.
On the other hand, the coin bubble should not be removed from the equation. The price of a coin does not always correspond perfectly to the value of the gold used in it, and the amount of capital demand can change the distance between the two. Therefore, to accurately assess the coin’s reaction to the US election, it is also necessary to examine the changes in the bubble and the volume of transactions.
The stock market rose against the dollar
In Tehran Stock Exchange, Wednesday trading was accompanied by the growth of indices. According to the information recorded at 12:31 p.m., the total index of the stock market increased by 88 thousand 42 points and reached 7 million 912 thousand 646 points. The total equal weight index also grew by 14 thousand 234 units and stood at 2 million 229 thousand 69 units.
Simultaneously with the growth of indices, the value of transactions was 327 thousand 382 billion monetary units included in the system and the volume of transactions was reported as 38 billion 279 million units. The total value of the market reached more than 229 million billion currency units.
The remarkable thing in this day’s transactions is the simultaneous growth of the total index and the equal weight index. This incident shows that the growth of the market is not limited only to the big and index-making symbols and the shares of smaller companies have also had a positive situation. However, in order to evaluate the quality of this rise, the flow of real money in and out and the general condition of the trading symbols should also be examined.
The rise of the stock market on the day of the release of the US election results cannot be directly attributed to this event. The Iranian stock market is more than just dependent on foreign political news, it is affected by variables such as exchange rate, interest rate, economic policies, product pricing and companies’ profitability prospects. However, the change of political expectations can influence the decision of investors along with other factors.
The markets are waiting for the clarification of the direction of the US policy
What is obtained from putting together the state of the financial markets on Wednesday is not a uniform picture. The dollar has experienced a drop in price, the stock market has risen, and the gold and coin market is still under the simultaneous influence of internal and external variables.
Markets seem to be currently assessing the implications of the US election outcome. For Iranian traders, the main issue is not simply the victory of one party over another, but the impact of this result on the future of Washington’s foreign policy and the prospects of Iran’s economy. If these developments lead to the reduction of political concerns, a part of the precautionary demand in the currency and gold market may be adjusted; But if the policies of the US government do not change significantly, we cannot expect the effect of the election news alone to be permanent.
In such a situation, the decline of the dollar and the growth of the stock market should be examined in the context of the daily reaction of the markets. The future path of trading depends on whether these changes continue in the coming days and whether traders are willing to change their asset mix based on the new political landscape.
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