Middle Eastern major country, gold reserves dropped nearly 120 tons in 14 days! What happened?

According to a report from Reuters cited by CCTV Finance and Economics earlier, in order to address energy supply shortages triggered by the Middle East conflict and the pressure from Turkish lira depreciation, Turkey’s gold reserves have fallen sharply by nearly 120 tons over the past two weeks, the largest two-week drop since relevant records began in 2013.

　The data released by the Central Bank of Turkey on the 2nd shows that for the week ending March 28, the country’s gold reserves decreased by 69.1 tons, and over the past two weeks they totaled a decline of 118.4 tons. As a result, Turkey’s total gold reserves fell to 702.5 tons.

　According to people familiar with the matter, of the gold reserves reduced by Turkey last week, about 26 tons were sold, and another roughly 42 tons were used for swap transactions. The essence of a swap transaction is “trading gold for foreign exchange, then redeeming it at maturity,” meaning the central bank hands over gold to its counterparty to receive an equivalent amount of U.S. dollars, while also entering into a forward contract agreeing to buy back the gold at a slightly higher price in the future. This is a form of short-term financing behavior, not a permanent full liquidation.

　Analysts say that Turkey’s move is mainly aimed at maintaining stability in the country’s currency. Since the outbreak of the Middle East conflict, global energy prices have surged significantly. Turkey is highly dependent on imported energy, so the pressure on foreign exchange payments has increased sharply. Meanwhile, market risk-aversion sentiment has risen, and the Turkish lira faces depreciation pressure. The Central Bank of Turkey has therefore had to step up its interventions to support the lira’s exchange rate and improve market liquidity. 

　Since the U.S. and Israel attacked Iran, sparking fighting in the Middle East, international gold prices have swung violently. As of the latest close, spot gold is reported at $4,675.99, down 1.73%.




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Editor: Ling Chen