Turkey was the biggest buyer of gold among central banks last year, with households also rushing to buy the commodity to shield from geopolitical uncertainty and rampant inflation.
The central bank’s gold reserves were at the highest level on record, the World Gold Council said in a report Tuesday. The official figure was 542 tonnes, up by 148 tonnes.
Demand for jewelery in the country also increased and jumped 32% year-on-year in the last quarter of 2022. “Despite the rise in the local gold price during 4Q, soaring consumer inflation brought the investment motive to the fore,” the WGC said.
Turkey has stepped up its ambitions to produce more gold than the existing average of 35 tonnes annually over the last five years, President Recep Tayyip Erdogan said last week. “Together with oil, gold is one of the most imported items,” he said during the opening of a new gold mine facility in the country’s west.
“We have the reserves to meet at least half of the demand in this area.”
Gold is also a popular commodity among Turkish households who use it as a hedge against currency and inflation pressures.
Turkey’s consumer inflation accelerated to as high as 85% last year before falling to 64% in December, thanks to a range of unconventional monetary policies that saw interest rates fall despite rampant price growth. The Turkish lira depreciated by almost 30% last year.
The price of gold in lira terms increased by 40% on an annual basis, according to data compiled by Bloomberg.
After a US case against Turkey state lender Halkbank on failing to comply with sanctions against Iran, Turkey repatriated all its gold holdings from the US. According to the Turkish central bank’s 2021 annual report, gold is kept at the Bank of England, at Istanbul Stock Exchange and the central bank.
Turkey’s imports of precious metals and stones swelled by almost 600% in December 2022 compared with a year earlier, separate data on Tuesday from state statistics agency TurkStat show. Energy and gold are the main drivers of Turkey’s trade deficit, which widened by 42% in the same period.
(By Kerim Karakaya and Beril Akman)
Read more: 2022 was strongest year for gold demand in over a decade — report