It’s something of an understatement to say that the relationship between the USA and Iran has been a little strained recently. In fact, due to the rising tension – as well as the military action which took place – the USA made its position clear by imposing sanctions on Iran directly on January 10th 2020. As with all geopolitical action, such events have a ripple effect across various sectors, but one possible consequence may come as a surprise: the price of Bitcoin (BTC) and gold are actually going up.
The background of the Iranian sanctions
The hostilities between the USA and Iran were initially sparked following the assassination of Iran’s top general, Qasem Soleimani, on January 3rd 2020. What followed was a period of uncertainty over whether or not Iran would retaliate. The world didn’t have to wait too long, as Iran launched missile attacks on various USA bases in Iraq on January 8th 2020. From here it seemed as though tensions would boil over into more widespread conflict, but mercifully the situation de-escalated following Iran’s missile attacks. There were no fatalities at any of the USA bases, leading many to believe that Trump’s scare-tactics had worked and that Iran was doing nothing more than venting anger.
The sanctions and market response
This situation all came to a head on January 10th when Donald Trump announced that the USA was implementing new economic sanctions on Iran which would damage its key industries. According to his administration, these sanctions specifically target 13 of the largest iron and steel manufacturers in Iran. There’s no doubt that such sanctions will have a significant monetary impact on Iran’s economy – and the markets seem to have responded. Immediately following these sanctions, the price of gold shot up to almost $1600, the highest it has been for 7 years. In addition, Bitcoin also surged to almost $9000 – the highest it has been since November 2019.
Could the sanctions be causing BTC and gold to boom?
There’s no doubt that damage to Iran’s economic infrastructure will have a knock-on effect on its key industries, and the risk of war leads to much speculation in this area. Between January 3rd and January 10th, both gold and Bitcoin traded down as investors worried about the risk of war breaking out. Despite being traditionally ‘safe’ investments, both of these commodities saw some downward trending. Thankfully for investors, on reviewing the charts, there is an undeniable correlation between the imposition of the Iranian sanctions by the USA and the correction of the price of each commodity. With both BTC and gold returning to growth, it seems as though the apparent de-escalation of hostilities between the USA and Iran has stabilised the value. How long this will last? Only time will tell.