Gold, silver and prices on other precious metals rose on the news of the EU sanctioning a gradual ban on Iran oil and all trade in diamonds, gold, silver and petrochemicals with the Iranian Central Bank. The measures also imply a ban on the delivery of new coins and banknotes to Iran.

On Monday, 23 January 2012, gold prices increased to a new six-week high of $1,678.30 per ounce. Meanwhile, silver futures jumped 60 cents to settle at $32.27.

The EU meeting of foreign ministers in Brussels has also decided to freeze the assets of Iran’s central bank to put pressure on Tehran’s controversial nuclear program by blocking all sources of foreign income.

EU countries will face a deadline of July 1, 2012, termed a five-month ‘grace period’ to complete the existing contracts with Iran. The governments will also research the outcome of the embargo before May to test its effectiveness and whether it can source oil from alternative sources.

The European Union countries want Iran to back off from its nuclear program allegedly planned to build weapons of mass destruction. But, Iran insists on the peaceful nature of its nuclear program, which is meant only for energy.

The Saudi Arabian government has promised to increase production by 2 million barrels per day to offset the loss of access to Iran’s 2.6 million barrels of oil per day.