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Does Turkish gold help maintain country’s currency stability?

Türkiye remains the world leader in gold purchases
Does Turkish gold help maintain country’s currency stability?
Türkiye raised its gold balance to 565 tons

Türkiye maintained its position as the world’s largest buyer of gold during the previous period, buying 23 tons in January. According to Bloomberg, the country raised its gold balance to 565 tons, the highest level it has ever reached, according to Gold Council data. Global.

CBT‘s new gold reserve management strategy coincided with a period of relative stability for the lira, but it was not a driving force behind it. The government’s “liraization” policy, implemented last summer, resulted in a higher proportion of lira-denominated deposits and a reduction in exchange rate pressures.

For several months, Türkiye has been hedging its currency’s weakness and the country’s high rate of inflation by purchasing gold. The Central Bank of the Republic of Türkiye (CBT) was the world’s largest buyer of the metal last year.

Last month, the Turkish Statistical Institute (TURKSTAT) reported a slight decrease in annual inflation to 55.18%, which was lower than expected, in the aftermath of a deadly earthquake that shook southern Turkey and killed over 45,000 people.

Read more: Central banks add $20 bn worth of gold in Q3

In general, Central Banks around the world added 31 net tons of gold to their reserves in January, purchasing the precious metal at a 16 percent increase over the previous month.

Following CBT, the People’s Bank of China and the National Bank of Kazakhstan were the largest buyers of the commodity, each adding 15 tons and 4 tons.

Türkiye has temporarily halted some gold imports over the last month as part of an emergency plan to mitigate the economic fallout from the devastating earthquakes.

The Turkish government is attempting to limit gold imports, which are viewed as the most significant threat to the deterioration of external financial conditions because they are imported in foreign currency, putting pressure on the country’s current account.

According to Swiss customs data, the country exported 188 tons to Turkey in the previous year, up from 11 tons in 2021, the highest level since registration began in 2012.

The lack of economic stability increased demand for gold, which many consider a safe investment, particularly in Turkey, where inflation has exceeded 80% in some periods over the last year.

Türkiye’s current account deficit increased to $48.8 billion in 2022, with gold imports accounting for more than $20 billion.

According to World Gold Council data, Türkiye’s interest in purchasing gold was not fueled by high retail demand. In 2022, the country’s central bank was the most prominent official buyer of gold, purchasing 148 tons.

According to ceicdata.com, Türkiye’s gold reserves will be worth more than $45 billion by the end of 2022.

Saudi’s 5 bn deposit lifts Turkiye’s foreign reserves

 

On Tuesday, the Turkish central bank’s net foreign reserves rose by $6 billion last week after a $5 billion deposit from Saudi Arabia entered its accounts, SPA reported.

The central bank’s gross reserves rose $6.5 billion to $126.5 billion in the same period, data showed.

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