Many countries around the world have gold reserves in their central banks. According to the June 2023 data of the World Gold Council, the country with the most gold reserves is the USA with 8 thousand 133.5 tons. The USA is followed by Germany with 3 thousand 352.6 tons and Italy with 2 thousand 451.8 tons. Again, according to the data of the council, the net gold reserve of Turkey, which was the top gold-selling country with 63 tons in May, decreased to 428.4 tons. When the reserves of the IMF and the European Union Central Bank are ignored, Turkey ranks 11th on the list. Why has Turkey’s gold reserves decreased recently, which has increased its gold reserves considerably in the past years?
‘Current account deficit’
Speaking to Kriptokoin.com, money markets expert Candaş Atalay says that Turkey’s gross gold reserves broke a record last year. Atalay says, “The Central Bank is among the top three central banks that make the most gold purchases in the world in 2022”. Saying that the main reason for the decrease in gold reserve data in 2023 is Turkey’s increasing current account deficit and the foreign trade deficit that comes in parallel, Atalay continues his words as follows:
“After the earthquake disaster in the first quarter of the year, Turkey’s current account deficit was increasing exponentially. The Central Bank took a decision and banned gold imports from abroad. There is a serious demand for gold in the country due to high inflation. As a result of the ban on gold imports, the Central Bank remained as the only institution that offered this gold to the domestic market. Therefore, the Central Bank met the demand of the domestic market by selling gold from its own reserves.”
The money markets expert says that the Central Bank aims for more than one purpose by selling gold in the domestic market. Atalay said, “First of all, it met the demand of the domestic market and prevented the outflow of foreign currency by banning gold imports. Especially during the election period, this ban was important to suppress the exchange rate.”
Mehmet Ali Yıldırımtürk, a gold and money market expert, also told cryptokoin.com, “The Central Bank sold its gold reserves to the domestic market without importing in the last two months before the election.” The market expert states that the reason for the recent decline in gold reserves in Turkey stems from this situation. Yıldırımtürk continues his words as follows:
“According to the data of the World Gold Council at the beginning of the year, the Central Bank of Turkey imported 90 tons of gold. However, according to the data of the World Gold Council, when 80 tons of this amount was sold in the domestic market, there was a slight decrease in gross and net reserves. In fact, Turkey’s gold reserves are much higher with its gold under the pillow, but that gold is not respected because it is unregistered.”
Why is gold reserve important?
Mehmet Ali Yıldırımtürk says that the place where a country’s gold reserves are looked at is the central banks and the amount of the reserve is important. Yıldırımtürk says that the more gold reserves a country has in its central bank, the higher the credibility of that country in foreign markets. Yıldırımtürk says, “For example, if the Central Bank had a thousand tons of gold, the credibility of the Central Bank or the rate of obtaining loans from abroad would be higher.”
Candaş Atalay, on the other hand, states that the main reason why Central Banks keep gold is the financial freedom of countries. Atalay said, “Gold is a decentralized instrument. It is not affiliated with any institution or country. This provides financial freedom.” money markets specialist He reminds that after Russia’s invasion of Ukraine, Russia’s reserves of approximately 300 billion dollars abroad were frozen. Atalay said, “We observe gold weights in reserves in many Middle East and Asian Central Banks around the world, especially after the Russia-Ukraine War. It stems from the fact that countries in these regions want to ensure their financial freedom.” Saying that 65 percent of the USA’s national reserves are in gold, Atalay states that the purpose of this is to send a message to many countries with strong reserves.
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