Turkey's record gold haul may get bought by cen­tral bank


Turkey is poised to pro­duce a record amount of gold this year and the cen­tral bank will prob­a­bly buy all of it-at prices near record highs. Pro­duc­tion by one of world's top buy­ers of the pre­cious metal is ex­pected to in­crease 16% to 44 tons this year, Hasan Yu­cel, head of Turkey's Gold Min­ers As­so­ci­a­tion, said in an in­ter­view.

Leg­is­la­tion in­tro­duced in 2017 gives the cen­tral bank the right of first re­fusal to pur­chase gold mined in the coun­try at pre­vail­ing mar­ket prices. The value of its gold re­serves surged to an all-time high in the week through Aug. 7, only to drop 5% a week later, the big­gest de­cline in five months. That ef­fec­tively mir­rored the moves in mar­ket prices over the same pe­riod.

"The cen­tral bank has al­ways been our only buyer since the leg­is­la­tion was changed," Yu­cel said, pre­dict­ing that the trend is un­likely to change this year. The value of the cen­tral bank's stock­piles have surged even as it ran down for­eignex­change re­serves to an al­most 15-year low to sup­port its weak­en­ing cur­rency.

Turks are big con­sumers of the com­mod­ity, which is used as a tra­di­tional gift for events rang­ing from wed­dings to cir­cum­ci­sion cer­e­monies. It's typ­i­cally also used by mer­chants in­side

Is­tan­bul's Grand Bazaar, one of the world's old­est cov­ered mar­kets, to pay rent.

That's helped keep lo­cal de­mand at about 160 tons for the past 25 years, and con­sumers are ex­pected to buy at least 150 tons, Yu­cel said. The coun­try's gold im­port bill was $7.2 bil­lion in 2019 for 160 tons, the as­so­ci­a­tion said. Im­ports amounted to 137 tons in the first seven months of the year, it said.

The cen­tral bank, based in Ankara, had 583 tons of gold re­serves at the end of June, up from 413 tons at end-2019, ac­cord­ing to the World Gold Coun­cil. While it's still far be­hind top hold­ers like the U.S. or Ger­many, the Turk­ish reg­u­la­tor has been the big­gest bul­lion buyer so far this year, adding about 170 tons to its stock­pile. In terms of con­sumer de­mand, Turkey is the fifth largest.

A spokesman for the cen­tral bank de­clined to com­ment on its pur­chas­ing strat­egy. The jump in gold prices has boosted ap­petite among lo­cal in­vestors to pro­duce the metal, even though lo­cal con­sumer de­mand has cooled as a re­sult, said Yu­cel, who is also the chief ex­ec­u­tive of­fi­cer of Nurol Hold­ing AS's gold-min­ing unit, Tu­mad Maden­ci­lik AS.

Turkey's re­cov­er­able gold re­serves of 1,500 tons is a big­ger resource for the coun­try than the nat­u­ral-gas dis­cov­ery in the Black Sea an­nounced by Pres­i­dent Re­cep Tayyip Er­do­gan on Fri­day, he said.

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