Turkey swaps dollar reserves for gold

Turkey has been buying a lot of gold lately and will continue to do so for the foreseeable future. To further replenish its gold reserves, their central bank buys gold not only from abroad, but also from domestic gold mines. That share is increasing, as Turkey's gold mining sector is expected to increase its production by 16% this year to 44 tonnes.

In doing so, Turkey is following the strategy of Russia, which has also been buying up domestic production for years to expand its gold reserves. In 2017, the Turkish central bank was granted the straight to be the first to buy the gold produced by domestic mines. The central bank has made full use of this option, because in the past two years not many countries have added as much gold to their reserves as Turkey. We wrote about this last summer Comprehensive analysis.

From foreign exchange reserves to gold

The gold purchases of the Turkish central bank are remarkable, because the country is not in such a strong economic position. The value of the Turkish lira has fallen sharply in recent years, but that hasn't stopped the central bank from making even more buy gold. This year, the central bank has already added more than 170 tonnes of gold to its strategic reserve, more than Russia and China, for example. According to the latest figures, the country now has a gold reserve of 602 tonnes, almost as much as the Netherlands.

While Turkey continues to buy gold at a rapid pace, its currency reserve has almost halved. There are several explanations for this. One such explanation is that the country uses dollars to import gold from abroad. According to Turkey's Gold Miners Association, Turkey imported 160 tonnes of gold last year with a total value of $7.2 billion. In the first seven months of this year, the country imported 137 tonnes of gold. As a result, the country is likely to draw on its dollar reserves again this year.

Gold Stocks

Due to the increase in Gold price Turkey's gold mining sector can invest in expanding its production capacity. According to Hasan Yucel, head of Turkey's Gold Miners Association, the country still has an estimated 1,500 tons of underground gold reserves.

At the current gold rate, this reserve is even more valuable than the gas reserves off the Turkish coast, Yucel told the Turkish coast. Bloomberg. "The added value of gold is much greater than that of the discovery of natural gas. That makes it clear that the government needs to do more to support gold production."

Turkey takes the lead in gold purchases (click for larger version)

Turkey has bought a lot of gold in recent years (click for larger version)

Gold vs Turkey Currency Reserves (click for larger version)

This contribution was made from Geotrendlines