Although traditional jewelry accounts for about 70 percent of national sales, there is growing demand for European-style jewelry (30 percent), much of which is unofficially imported.

Gold is the most highly prized of all metals. Its bright yellow glitter and malleability has made it, since the dawn of history, the metal most treasured. The earliest craftsmen used gold to fashion decorative pieces of all kinds. In the Middle Ages, artisans were trained as goldsmiths to create jewelry and ornaments of the finest order, some surpassing the craftsmanship of even today.
Gold found in its native state is rarely pure 24k, but is usually associated with silver and often with mercury. In its natural state of pure gold, the substance is very malleable and can be hammered into very thin sheets. Gold has no oxides and is not affected by oxygen in the atmosphere as are other metals. This is why gold does not tarnish.
Gold quality is determined by karat content or fineness, and each karat is 1/24th part of the entire substance. Pure gold is 24 karats, and as it is alloyed with other metals, the gold content decreases. For example, 18k gold is 18 parts pure gold and 6 parts of alloy metals; 14k gold is 14 parts pure gold and 10 parts other metals.
A comprehensive study of the Iranian gold market indicates that Iran has been a major gold consumer in recent years Ð a gold market in hiding. Supportive internal economic factors and limited investment opportunities have also contributed to the country’s growing interest in gold.
According to ISNA, the study, commissioned by the World Gold Council and supported by the Iran Trade Promotion Organization (ITPO) and the Australian Trade Commission (Tehran), was undertaken by Grendon International Research (GIR) between June 2004 and July 2005.

Trade Mission
ITPO organizes trade missions to major existing and emerging markets. By participating in such missions, Iranian companies can develop business contacts and network with foreign officials, business leaders and international buyers.
Also development of economic and commercial relations of the Islamic Republic of Iran with other countries is one of the major tasks of ITPO. Due to the implementation of various economic, social and cultural plans during the past 15 years, Iran’s capabilities indicated a rapid growth in industrial, mining, agricultural and commercial sectors.
Introduction of these capabilities especially in the field of non-oil export has helped and encouraged large number of foreign tradesmen, craftsmen and commercial institutions to properly enhance their trade relations with Tehran. Therefore, strides have been made to furnish all the interested parties and enthusiasts with important information concerning some of the country’s economic sectors.
In GIR’s view, the Iranian gold market has been greatly underestimated in recent years because it has not been on the international radar screen. Had other research companies been able to explore the market, analyze its trade structure and exposed to the breadth and depth of the market at first hand, the experience would inevitably have led to further investigation among relevant trade entities in countries that supply Iran with bars and jewelry unofficially.

Iranian gold market is now so large that several government initiatives are being taken to monitor and support the gold jewelry industry.

According to GIR’s conservative estimate, total gold consumption in the form of jewelry, net bar hoarding and coins appears to have been at least 139 tons in 2004. GIR’s jewelry consumption estimate of 118 tons (2004), including unofficial imports, has also ranked Iran as the world’s sixth largest gold-jewelry-consuming country in 2004 Ð after India, US, China, Turkey and Saudi Arabia.

Findings
These unexpected findings are the outcome of three fieldtrips to Iran, totaling eight weeks, when GIR was able to meet 73 government and trade entities, not only in Tehran but also in the major cities of Tabriz (west), Mashhad (east), Esfahan (central) and Shiraz (south), and in smaller cities such as Rasht (north) near the Caspian Sea. The findings are also the outcome of fieldtrips (three weeks) to Dubai and Turkey Ð Iran’s main suppliers of bars and imported jewelry Ð where GIR interviewed many relevant trade entities. Reconciling the perspective of trade entities in Turkey, Dubai and Iran represented a crucial test, as conservative research takes into account the lowest common denominator.
Gir’s report also said Iran is bordered by seven countries: Iraq, Azerbaijan, Armenia, Turkmenistan, Afghanistan, Pakistan and, importantly, Turkey Ð whose border with Iran is 499 km. Across the Persian Gulf, Iran also faces Dubai, the well-known conduit of gold bars and jewelry to countries throughout the Middle East. The size of the Iranian gold market is not really surprising in hindsight, given the country’s large population of 69 million, which is the same as that of Turkey.
The report further states that over the past 20 years, Iran’s population has grown by 57 percent, with its urban segment now around 65 percent. Over the past ten years, the country’s growth Ð in particular the capital Tehran, the hub of the national gold market Ð has been exponential, with its population increasing by almost 80 percent, from 7 to 12 million.

Large Size
In Gir’s view, the large size and growth of the Iranian gold market can be viewed in the context of supportive economic factors. For more than 20 years, following the Islamic Revolution in 1979, the official view of government institutions had been that gold was a “luxury“ product, and consequently the gold industry did not warrant significant government attention. However, the Iranian gold market is now so large that several government initiatives are being taken to monitor and support the gold jewelry industry, the most notable of which are detailed below:
Licenses: In 2005, a major program was initiated to license the several unlicensed gold jewelry fabricators, wholesalers and retailers. It is envisaged that, over time, every trade entity will be allocated an “ID code“ for inclusion in all transaction documents.
Hallmarking: In 2005, the Institute of Standards & Industrial Research of Iran introduced a system whereby every jewelry fabrication unit would be obliged to apply stamps recording its “ID code“ and the Institute’s new symbols for the three authorized caratages: K22, K18 and K14. It is likewise envisaged that, over time, all gold jewelry fabricated in Iran will be hallmarked in this way.
Exports: The Iran Trade Promotion Organization is embarking on a program to support the export of Iranian gold jewelry. The Export Development Fund for Gold, Jewelry, Silver & Watches of Iran, established in 2005, has opened a representative office in Dubai. Gold jewelry exports have historically been low, with less than four tons exported in 2004.
Import Duty: The 4 percent duty on official bar imports, applied since March 2003 on bars imported for domestic sale by the Central Bank of Iran and by banks that might wish to act as authorized importers, is reported to be under review. If the 4 percent duty is reduced, the unofficial import of bars, on which the market largely relies, would be curtailed.
Gold Jewelry: The size of the jewelry market is reflected in the number of jewelry retail outlets. According to a survey (conducted by the Iran Trade Promotion Organization in each of Iran’s 30 provinces in 2005 as part of the GIR study), there are at least 15,500 outlets.
According to trade entities, the number has increased by around 20 percent over the past five years, notably in the major cities. It can be noted that GIR’s conservative estimate of jewelry consumption in 2004 represents an average sale per retail outlet per business day of only 30g.

Dominant
K18 is the dominant caratage, accounting for around 85 percent of total jewelry consumption. The bangle is the most important product category, accounting for around 50 percent of the total market. Although traditional jewelry accounts for about 70 percent of national sales, there is growing demand for European-style jewelry (30 percent), much of which is unofficially imported.
Gold jewelry is bought as an adornment, but the investment dimension is extremely important. Seasonal demand by region varies, but for most regions purchases tend to be higher in March (prior to the start of the Iranian New Year on March 21), and over the four-month period, June to September, when weddings normally take place.
The fabrication of gold jewellery is largely concentrated in five cities: Tehran, Esfahan, Tabriz, Mashhad and Yazd. Although there are at least 6,000 fabrication units according to the Iran Trade Promotion Organization survey, the market relies heavily on small units employing five or fewer workers Ð mostly family members. The bulk of fabricated output is distributed by more than 600 wholesalers nationwide, but dominated by the Tehran wholesalers, who are reported to account for around 70 percent of the wholesale market.

Gold Bars
Apart from imported bars, mainly 995-purity kilo-bars, an unusual feature of the market is its parallel reliance on large quantities of tradable scrap bars, usually made from old gold jewelry. These crude bars, normally in the shape of rods, have variable lengths, weights and purities. They are made by more than 100 small melting units, working in association with a similar number of small private assay laboratories that mark the bars with the correct purity so they can be actively traded, and used with confidence by jewelry fabricators. In conclusion, the Iranian study indicates that the importance of Iran in the international gold market has been overlooked in recent years, and that Turkey has greatly expanded its role over the past three years as a conduit of bars to Iran and other countries in the region. In other words, Iran is a major gold market in hiding.