Turkish Gold Imports Triple As The Central Bank Diversifies Out Of Dollars

Turkish gold imports surged due to a sharp increase in investment demand as well as renewed Central bank purchases.  While the Chinese and Russian governments have been adding gold to their official reserves over the past several years, Turkey added 86 metric tons to its official holdings in the last seven months of 2017.

According to the 2018 World Gold Survey, Turkish official gold holdings reached a new record high of 565 metric tons (mt) last year as the government decided to replace a significant amount of its Dollar reserves with gold.  And, this continued even in the first quarter of 2018.  Information from the World Gold Council’s Demand Trend reported that Turkey added another 30 mt of gold to its official reserves in Q1 2018.

If we look at the chart below, we can see just how much gold Turkey imported in 2017 versus 2016:

Turkish gold imports more than tripled from 106 mt in 2016 to 361 mt in 2017.  Again, the large increase in Turkish gold imports was due to a 60% increase in investment demand and the 86 mt purchase by the Central bank.  With the addition of the 30 mt of Central bank gold purchases in Q1 2018, official Turkish holdings are now nearly 600 mt.  

Of the total 366 mt of Central bank gold purchases in 2017, Russia (224 mt) accounted for 61% of the amount while Turkey (86 mt) acquired 23% and Kazakhstan (43 mt) at 12%.  The remaining 4% was split amongst Columbia, Mongolia, Indonesia, Jordan, and Thailand (Source: GFMS 2108 World Gold Survey):

What is quite interesting about the increase in Turkish gold demand and imports is how it compares to the United States.  In 2017, Turkey imported 361 mt of gold versus 255 mt for the United States.  Thus, Turkey, whose population is one-quarter of the United States, imported 100+ mt more gold.  Of course, most of the U.S. gold imports are refined and then exported to Switzerland, United Kingdom, China and various other Asian and Middle Eastern countries.

Furthermore, as U.S. gold investment plunged by 55% in 2017, Turkish demand for gold bullion surged by 60%, mainly due to an increase in official coin purchases.  According to the 2018 World Gold Survey, Turkish official coin sales jumped to 38 mt versus 22 mt in 2016.  Thus, the Turkish population consumed more than three times the 13 mt of U.S. official gold coin sales last year.

Now, if we look a the major foreign holders of U.S. Treasury securities, Turkey has been liquidating its Dollar holdings by $16 billion since its peak in October 2017:

You will also notice that Russia has also been liquidating U.S. Treasuries by approximately $11 billion since its peak in November 2017.  However, Russia wasn’t selling U.S. treasuries to purchase gold; rather they were diversifying out of Dollars and into IMF Bonds (Source: Russia says it will sell some U.S. Treasuries, buy IMF bonds).  As Russia sells U.S. Treasuries to purchase IMF Bonds, it also added another 42 mt of gold to its reserves in Q1 2018.

While there are countless reasons why Russia is adding gold to its official holdings, the most important reason is quite simply, because IT CAN.  The majority of countries are running massive trade and balance account deficits and cannot purchase gold.  Russia is one of the few countries that export a great deal more oil than it uses domestically which is part of the reason it enjoyed a $115 billion trade surplus last year (Source: Russia: Trade Balance – Statista)

Yes, the U.S. Govt could print money to purchase gold, but it’s not quite that simple.  First, there are no western central banks buying gold.  They just can’t.  Most of the Central Bank sold into the market has come from the IMF and western central banks.  Second, for a western central bank to start purchasing gold, it would be seen as a huge RED FLAG to western fiat currencies.

Lastly, gold is a barometer for the U.S. Dollar.  If the U.S. Government started printing money to buy gold, just think about how that would not only impact the price but market sentiment.  Western central banks will continue to liquidate gold until the financial markets and the fiat monetary system disintegrate.

When we start to see more countries like Turkey adding to their gold reserves, it’s a clear sign that all is not well in the global financial markets.

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15 Comments on "Turkish Gold Imports Triple As The Central Bank Diversifies Out Of Dollars"

  1. By happenstance this past Sunday, my wife and I flew from Budapest through Istanbul back to hometown U.S.A. We flew Turkish Airlines. Great airline experience at a great price. Anyway, Turkish airlines has an on-board magazine that encourages foreign investment in the Turkish economy. Lots of articles on corporate investment and how Turkey is aspiring to be an export driven economy. One of the articles focused on energy. Turkey has plans to build two nuclear power plants. The article also mentioned that Turkey imports 90% of their energy. The article stated that Turkey wants to increase its overall renewable energy (solar) from the current 5% to 40% and they stated it was possible because countries like Germany had already pioneered the way. As I flew into Istanbul I was able to get a feel for the size of the city. It’s a huge megalopolis larger then Los Angeles. Istanbul has over 14 million inhabitants. Anyway,I was wondering if they’d be able to complete their nuclear power plants. Since we in the U.S. have not been able to build one since 1996. We even have a couple of extremely expensive partially built nuclear plants that are on indefinite hold. I was also wondering where Turkey expected to get all the silver required to build those Solar cells. Seems like all nations are trying to become more energy self sufficient and are focused on solar, wind, hydro, and nuclear. I’ve read similar articles about China and India diversifying their energy mix in a similar fashion. I find it interesting that Turkey which used to be the Ottoman empire which used to be the Byzantine Empire, which used to be the eastern half of the Roman empire and was once considered the center of the world for a thousand years wants to buy gold. A lot of gold.

  2. Great comments about Turkey Pete. I lived there in 1999 for 3 months. Was even in an earthquake.

    Turkey has what all middle eastern countries have. They all want to be like America. Its sad. They will never succeed with an attitude that is entirely copycat. Turkey could never be European, although the upper class is content to act like it is. The political elites wanted a housing / investment bubble in the 90s and they got one. I cannot speak for what Erdogan is doing, but I’ll tell you the population of Turkey is hell bent on trying to be a middle class subject. Ask American how well thats working for them…

    • According to lots of people around here, it is just a problem of central bank issue (end of the fed) and the paradise of capitalism will happen. I guess that most did not even read the wealth of nations.

  3. Have a young Kurdish teacher I tutor in English,he says the economy is in shabbles in Turkey, they need money for infrastructure badly.

  4. It was reported recently that Turkey has repatriated 220 tons of gold from the US Reserves in 2018. If this is true, your charts may need an updating 🙂

  5. Just add in the mix that Turkey is as well a gold producer and many turks buying private gold as well so I suspect the gold reserves of Turkey are much higher as the official numbers of the turkish central bank have provided.

    There is of course the crude from Iran of which Turkey processes in the form of gold settlement. Could that be the reason the increasingly in volume payment of crude with
    gold to bypass the us sanctions?

  6. Turkey goes Venezuela, like Argentine, Mexico, GB, Egypt, Costa Rica, Brazil.

    https://tradingeconomics.com/turkey/currency

    The promises of their fiat currencies cannot be fullfilled, what’s left is the fogs of the big fiats until they, too, fail.

  7. It seems that holding cash is the best.I did suggest this 3 years ago.
    Gold and silver is in a depression at first decreasing.
    In the moment we have an increasing oil price and a stronger dollar.

    That’s not normal.A strange behaviour.

  8. Hi, if & when you get a chance, please examine following article. (Sorry, it’s somewhat long & lots of claims made in it point by point.) Especially if possible: Please address its basic thesis, and/or any specific point(s) within it.

    https://www.goldmoney.com/research/goldmoney-insights/crude-oil-the-next-5-years

    Thanks in advance & regards!

    Current level of instability is causing tremendous anxiety. (A huge understatement.) I keep feeling we’re now getting within touching distance of the 1970s oil panic, interest panic & various assorted ills. Only Lord knows what human-engineered calamity is now coming upon us. ?!?

    Hope to hear back from you. Going back to the underground bunker to seek some sanity, it’s badly needed.

    😉

  9. Turkey is going to be terminated, that’s is the price to pay to fall in bed with the two asian uncles scrooge known as Putin and Xi Jinping. It is not only the US which is bullying its allies (in fact vassals so that’s perfecly “normal”), that’s also the great eastern capitalist.
    Their citizens can buy some gold, which could help them but regarding the state/banks/central banks, it won’t change so much…

  10. An alternative for the title:

    “Turkish Gold Imports For Iran Triple As Iranian Central Bank Intensifies Its Dedollarization Campaign.”

    • Iran is falling into dustbin like venezuela which had in some way dedollarized. Except more interesting stuff when russian and especially chinese predators will take their pound of flesh : exactly as USA, World bank and IMF did…

  11. Russell just hit a new all time high : other indexes will follow soon.

    https://www.zerohedge.com/news/2018-05-16/russell-2000-surges-record-high-us-economic-data-dumps

    I know it is because the dollar is trash and all this kind of BS… Still no silver ruble and petro yuan : just king dollar.

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