Turkey witnessed an unprecedented step from the Turkish central bank over the past two weeks, as it sold and swapped nearly 60 tons of gold, worth over 8 billion dollars, following the outbreak of tensions with Iran. These measures came as part of an effort by Turkish authorities to maintain the stability of the Turkish lira and address the economic pressures facing the country due to inflation and rising energy costs.

🔹 Details of Sale and Swap

Data from the central bank showed a sharp decline in gold reserves, with a loss of about 6 tons in the week ending March 13, followed by an additional loss of 52.4 tons the following week, bringing the total decrease to 58.4 tons in just two weeks. Part of the gold was sold directly, while most of it was used in swap operations to obtain foreign currencies and Turkish liras, aimed at enhancing liquidity and supporting the exchange market.

🔹 Economic Goals

Turkey is facing dual pressures:

Rising Inflation: Inflation reached 31.5% in February, putting pressure on citizens' purchasing power.

Rising Import Bill: The heavy reliance on energy imports, especially from Iran, has increased the need to support the lira.

Selling and swapping gold helps the central bank inject liquidity in both local and foreign currencies, thus attempting to maintain the strength of the lira and calm the markets.

🔹 Impact on Global Markets

This step has not only affected Turkey but has also had an impact on global markets. Pumping large amounts of gold into the market has led to increased downward pressure on gold prices globally. Investors see these measures as an indicator of economic and geopolitical tensions, making gold temporarily less attractive as a safe asset.

🔹 Future Strategy

Despite the central bank's attempts to raise financing costs and control the market, pressures on the lira and the Turkish economy continue. In contrast, the bank is expected to continue using gold as a defensive tool, either through direct sales or swaps, to provide urgent liquidity and enhance currency stability, but this will be costly in the long run.

🔹 Summary

Selling and swapping gold is a necessary step to support the Turkish lira amid the inflation crisis and rising energy costs, but it also reflects the weakness of reserves and the impact of geopolitical events on the Turkish economy. Investors need to monitor upcoming movements, as any significant fluctuations in gold or lira prices could create wide fluctuations in the market.