Turkey – another country significantly raising its gold reserves

Turkey – another country significantly raising its gold reserves by Lawrie Williams – Sharps Pixley

For the past few years we have been seeing an overall rise in national reserves of gold – at least from countries which are believed to be providing accurate figures to the IMF.  But if we look at the IMF gold reserve data, the reserve increases have been confined to relatively few nations – notably China (when it deigns to report its increases), Russia, Kazakhstan and, recently, Turkey.  In part these reserve increases represent a means of maintaining the size of their forex holdings, yet while reducing their dependence on U.S. Treasuries as an integral part of these holdings.

As Dr Martin Murenbeeld noted recently he anticipates this trend for central banks to add to their gold holdings to increase, particularly if the U.S. becomes deeply embroiled in a global trade war.

Dr Murenbeeld thus anticipates an increasing trend for countries to move away from U.S. dollars and dollar-based securities as a reserve currency in part due to the nation’s enormous debt position, but also due to what has to be considered the U.S. utilising its dominant trading and forex positions to its own advantage.  There are the beginnings of a logical fear that the U.S. may freeze assets held in order to gain other advantages and concessions from countries it may view as hostile – indeed it has already done so.  So there is a tendency towards reducing dollar dependence which could well grow.  Holding gold instead of U.S. dollars is one way of achieving this aim and reducing what may be seen as counter party risk.

Thus countries which follow policies which might be seen as counter to those of the U.S. are beginning to feel particularly at risk.  Among these will be Russia and its erstwhile allies from the Commonwealth of Independent States and it is notable that Russia itself and Kazakhstan are at the forefront of such a central bank gold-purchasing policy.  Both are themselves important gold producers and most of their gold reserve increases are from buying up local production.  Other CIS nations – notably Kyrgyzstan, Tajikistan and Belarus have also been buying gold, but because their economies, and overall forex reserves are small by comparison, the amounts being purchased are pretty much under the radar

But one country which has added a significant amount to its reserves over the past couple of years is Turkey, which is becoming increasingly aligned politically with Russia.  In 2017 Turkey added 85.9 tonnes of gold to its reported central bank reserves – the second highest of any country, and in the first four months of the current year another 33.9 tonnes.  Metals Focus, in its most recent weekly newsletter comments: “It has been increasingly apparent that President Erdogan, and hence the current Turkish government, are pro-gold, with both promoting its role in the financial system, while at the same time also trying to lessen the country’s dependence on the dollar.”

The consultancy goes on to note that “Until 5th May 2017, the Turkish central bank’s gold reserves had remained stable at 116.1 tonnes. However, since then these reserves have more than doubled, reaching 239 tonnes (as of 14th June). The increase is the result of the latest strategy of the central bank to buy locally mined and refined gold in Turkey through the Borsa Istanbul (BIST), which they started to do this January.

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Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London – recently described as the World’s No. 2 University (after MIT). He has worked in mines in South Africa (gold, uranium and platinum), Canada (uranium), Zambia (copper) and U.K (coal) and holds a South African Mine Managers certificate. He also worked as a gold mining company analyst for one of the major South African mining houses. He left South Africa to join Mining Journal as Financial Editor and worked his way through that organisation to edit Mining Magazine, and then join the Board. He was Managing Director (CEO) of the company for 13 years up until it was sold in 2001. During part of this period he was also President of Nevada-based U.S. company Mining Media Inc which was publisher of North American Mining magazine.