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Turkey is seeing unprecedented domestic demand for gold that is having a huge impact on the country's official reserves. Despite the general market trend, the Turkish central bank continues to sell significant amounts of the precious metal. Let's unravel this intriguing trend in the gold market, backed by the latest data from the World Gold Council.
According to Krishan Gopaul, senior analyst at the World Gold Council, central banks worldwide sold 27 tonnes of gold in May. But remarkably, the Turkish central bank sold 63 tonnes of gold in the same month alone. Since March, Turkey's central bank has sold nearly 160 tonnes of gold - equivalent to the cumulative purchases over the previous 12 months.
What is the driving force behind this big gold sale in Turkey? The answer lies in the country's economy. Turkey is facing crippling inflation levels, and consumers are turning to gold to protect their purchasing power. This forces the central bank to sell gold while restricting gold imports to control the trade deficit.
Inflation in Turkey has been declining for eight months but remains extremely high with an increase of 38.2% in the last 12 months. This high inflation combined with restrictions on gold imports makes Turkey a net seller of gold on the world market.
But Turkey is not the only country selling its gold reserves. Other net gold sellers included the Central Bank of Uzbekistan, which sold 11 tonnes of gold, while the National Bank of Kazakhstan and Germany's central bank each sold 2 tonnes of gold in May. At the other end of the spectrum, however, we see a positive trend in gold purchases by central banks. The National Bank of Poland increased its gold reserves by 19 tonnes, while the People's Bank of China increased its reserves by 16 tonnes. The central banks of Singapore, India, the Czech Republic and the Kyrgyz Republic also each increased their gold reserves.
These divergent trends in gold sales and purchases show how countries are responding to their economic situations in different ways. While some countries sell their gold reserves to address domestic economic problems, others continue to buy gold to diversify their reserves.
So, while Turkey is exerting its influence on the gold market, the general consensus remains that continued central bank purchases will continue to support gold prices through 2023 and beyond. "Central banks are buying gold because they want diversification in their reserves from the U.S. dollar. That's an ongoing trend, it's not just an event in 2023," said Douglas Groh, Managing Partner at Sprott, in a recent interview with Kitco News.
It is clear that the dynamic gold landscape continues to evolve and that Turkey plays an important role in this development. With the unprecedented demand for gold in the country and the continued selling by the central bank, Turkey will be a country to watch in the gold market. In today's uncertain times, gold continues to play an important role in the economies of countries around the world. Whether it's to protect purchasing power in times of high inflation or to diversify reserves, the value of this precious metal cannot be underestimated.
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On behalf of Holland Gold, Paul Buitink and Joris Beemsterboer interview various economists and experts in the field of macroeconomics. The aim of the podcast is to provide the viewer with a better picture and guidance in an increasingly rapidly changing macroeconomic and monetary landscape. Click here to subscribe.
Source:
Kitco:https://www.kitco.com/news/2023-07-05/Looking-past-Turkey-s-gold-sales-central-banks-continued-to-buy-gold-in-May.html
Author:
Neils Christensen
