The Central Bank of Turkey sells and swaps approximately 60 tons of gold, intensifying downward pressure on gold prices.

Within two weeks after the outbreak of the war in Iran, the Turkish central bank sold and swapped approximately 60 tons of gold (worth over $8 billion), exacerbating downward pressure on gold prices.

According to the latest data released by the central bank, Turkey’s gold reserves decreased by 6 tons in the week of March 13 and by another 52.4 tons in the week of March 20, indicating a sharp reduction in reserves. According to insiders, part of this was direct sales, while most was through swap agreements to obtain foreign currency or lira.

The Turkish central bank declined to comment.

This move comes at a time when Turkey’s de-inflation strategy is under pressure. The bank’s strategy heavily relies on maintaining a stable lira exchange rate or a smooth depreciation, using methods that include hard currency interventions through state-owned banks. Since the conflict began, rising energy import costs and increasing demand for dollars have made it more difficult to maintain this strategy.

Iris Hibra, founder of Istanbul’s Phoenix Consultancy, stated that officials are using gold from the central bank’s $135 billion reserves for sales and swap arrangements to meet liquidity needs and stabilize domestic demand. She estimates total sales at 58.4 tons, with more than half conducted through overseas “gold for foreign exchange” contracts.

It is not uncommon for the central bank to agree on future repurchase terms through swap agreements while selling spot gold, essentially using precious metals as collateral to obtain cheap dollar financing.