According to a report by the Financial Times, since the outbreak of the Iran war, Turkey has sold or lent out gold worth $20 billion. This series of gold sales has intensified the decline in gold prices, contributing to their largest monthly drop since 2008.
Analysis by consultancy Metals Focus, based on official data, shows that the Turkish central bank sold a net 52 tonnes of gold between February 27 and March 27. This reduced its net reserves to 440 tonnes, the lowest level in over two years. According to calculations by the Financial Times, during this period the bank also arranged approximately 79 tonnes in gold swaps—leasing out bullion to earn returns, which increases market supply and puts downward pressure on prices. The total value of these sales and swaps is nearly $20 billion at current prices.
The global energy shock and the widening Middle East conflict have prompted a growing number of countries, including Russia and Poland, to consider selling gold to support their currencies or improve fiscal conditions. The Turkish central bank is among those globally that have sold U.S. Treasuries to bolster their national currencies.
Analysts note that central banks were previously key drivers of the gold bull market, pushing prices to a record high above $5,500 per ounce in January this year. However, their recent shift in behavior has pulled down gold prices. Last month, gold fell 11.5%, marking its worst monthly performance in 18 years.
Nicky Shiels, an analyst at refiner MKS Pamp, stated, "Central bank selling has been the primary driver behind gold's $1,000 decline over the past few weeks. The market had assumed central banks were a backstop... but recent data flows and official statements are contradicting that."
Data from Metals Focus indicates that Turkey's gold selling accelerated at the end of March, with 31 tonnes sold in the week ending March 27.
Turkish economic commentator Uğur Gürses, who previously worked in the bank's gold reserve management department, said, "The Turkish central bank has traditionally held 60% to 70% of its reserves in gold. Therefore, it had to sell or swap part of that to raise needed dollar liquidity."
Gürses added, "If 50 tonnes of gold enters the market, it can have a huge impact on prices." He believes the Turkish central bank now has sufficient liquidity and may not need to sell more gold in the short term.
These gold sales underscore Turkey's determination to support the lira, as exchange rate stability is a core pillar of the country's more than two-year campaign to curb inflation—currently at 31%. According to calculations by Bürümcekçi Research and Consulting based on official data, Turkey’s net international reserves have fallen by nearly half since the start of the Iran war, to $46 billion.
The sales also reflect a broader shift in global central bank gold reserve management. Data from industry group the World Gold Council shows that net gold purchases by central banks last year were about 860 tonnes, down 20% from the previous year. This year, besides Turkey, known sellers include Russia, which sold 15 tonnes of gold in January and February. Meanwhile, the head of Poland's central bank recently proposed selling gold to raise defense funds, although the government opposes the plan.
Market participants suggest that further gold sales this year could come from oil-importing countries hit by the energy crisis, such as India, or from Central Asian nations holding significant gold reserves.
Gold’s sharp decline last month—contrary to its traditional role as a safe-haven and inflation hedge—also reflected four consecutive weeks of outflows from gold exchange-traded funds (ETFs) since the war began, as some investors rushed to take profits on long positions amid the Middle East conflict.
A growing number of central banks are also choosing to repatriate gold reserves. For example, France announced last week that it has completed a multi-year plan to withdraw its gold and no longer holds any gold in the U.S.
Not all central banks are selling. Data released Tuesday showed that China's central bank increased its gold reserves to 74.38 million ounces at the end of March, up by 160,000 ounces from 74.22 million ounces at the end of February. This marks the 17th consecutive month of gold purchases by China’s central bank and its largest single reported purchase in over a year.
Shaokai Fan, head of Asia-Pacific at the World Gold Council, commented, "We are seeing central banks taking two stances on gold price movements. Interest in gold among central banks has increased over the past few months, but it is a two-way street."
Comments