Under the impact of the Iran war, the scale of Turkey's gold reserve utilization far exceeded market expectations.
According to Reuters, citing data from Thursday, Turkey's central bank's gold reserves plummeted by over 118 tons in the past two weeks, valued at nearly $20 billion. Of this, 69.1 tons were depleted last week, bringing the total to 702.5 tons. The weekly selling volume marks the largest single-week decrease recorded since at least 2013.
Furthermore, three banking sources estimated that approximately 26 tons of gold were sold directly last week, while another 42 tons were utilized through swap transactions; the week prior saw a reduction of 49.3 tons in gold reserves. The Turkish Central Bank declined to comment on these estimates.
This move signifies a major policy shift for Turkey. In the past decade, Turkey has been one of the most active gold buyers globally.
Analysts suggest that the scale of this sell-off is equivalent to about 15% of its total gold holdings, representing the reserves accumulated over the past six years. Following the outbreak of the Iran war, global energy prices surged, leading to a sharp increase in demand for foreign exchange liquidity and pressure on the lira. This forced authorities to heavily utilize gold reserves to stabilize the exchange rate and meet payment demands for energy imports.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/8d452401-db9a-4343-9aa4-8b7bacd33ea4.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/8d452401-db9a-4343-9aa4-8b7bacd33ea4.png"/>
Despite such a large-scale concentrated sell-off, gold prices have not seen a corresponding decline, leading to market questions: Who are the buyers continuously absorbing this massive amount of gold sold by Turkey?
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/2637b6d6-f6cb-40c7-8bbd-0014da8edf0d.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/2637b6d6-f6cb-40c7-8bbd-0014da8edf0d.png"/>
<h2>Decrease Marks Ten-Year High, But 'Gold Swaps' Need Attention</h2>
According to reports, Turkey's gold reserves decreased by 69.1 tons last week, a drop unprecedented since the central bank began publishing its international standard gold reserve data in 2013.
Iris Cibre, founder of Istanbul-based Phoenix Consultancy, estimates that Turkish officials have utilized a significant portion of the central bank's approximately $135 billion gold reserves through sales and gold swap arrangements. She estimates the cumulative sales at about 58.4 tons, with more than half conducted through overseas &#34;gold-for-forex&#34; swaps. Independent calculations by three banking sources indicate that about 26 tons of gold were sold directly last week, with an additional 42 tons utilized via swap transactions.
As analyzed by Wallstreet News previously, the essence of a gold swap is &#34;exchanging gold for foreign exchange with a commitment to redeem later,&#34; not &#34;selling,&#34; but &#34;borrowing.&#34; The central bank hands over gold to a counterparty (usually a primary dealer) to obtain equivalent USD, simultaneously entering into a forward contract to buy back the gold at a slightly higher price in the future. This is a short-term financing activity, not a permanent liquidation.
The central bank's choice of swaps over outright sales has at least three considerations. First, maintaining a long-term position. If the surge in oil prices is deemed a temporary shock, swaps can provide immediate relief, allowing the gold to be redeemed later, thus preventing the destruction of ten years of accumulation. Second, reducing the impact on gold prices. A direct sell-off of 60 tons could trigger a sharp market crash, in turn causing a significant depreciation of its remaining over $100 billion in gold reserves. Swaps are conducted quietly in the over-the-counter market, with much less impact. Third, a buffer at the domestic political level. Gold is considered an &#34;inflation-hedge totem&#34; among the Turkish populace, and announcing large-scale gold sales could easily trigger panic, whereas swaps can technically maintain a certain degree of ambiguity.
This operation was able to be completed rapidly within two weeks, thanks to a key prior arrangement: Turkey held approximately 111 tons of gold at the Bank of England, valued at about $30 billion. This gold could be used for foreign exchange intervention without logistical constraints – it could be pledged and monetized directly in the City of London without cross-border physical transportation.
<h2>Dual Pressure of Lira Defense and Energy Bills</h2>
The drivers behind Turkey's massive gold sell-off are two overlapping pressures: Lira exchange rate stability and financing energy imports.
Following the outbreak of the Iran war, global energy prices soared. As an economy heavily reliant on energy imports, Turkey faced a significant increase in foreign exchange payment pressure. Concurrently, market risk aversion rose, putting depreciation pressure on the lira. The Turkish Central Bank was compelled to intensify its intervention efforts, not only by utilizing gold reserves but also by increasing direct forex sales and employing other market operation tools.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e8f52595-b2ed-4701-a952-5e6f29b2cbfa.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e8f52595-b2ed-4701-a952-5e6f29b2cbfa.png"/>
This situation poses a direct threat to Turkey's &#34;de-inflation&#34; strategy. The core of this strategy lies in maintaining the stability of the lira or a gradually controlled depreciation path, typically achieved through forex intervention by state-owned banks. However, rising energy costs and increased demand for USD are continuously eroding the sustainability of this framework.
<h2>Central Bank Governor: Proactive, Flexible, and Controllable</h2>
Addressing external doubts about the significant depletion of gold reserves, Turkey's Central Bank Governor Fatih Karahan publicly defended the operations before attending an investor conference in London this week.
In an interview with Turkey's state news agency Anadolu Agency, Karahan stated that the central bank is adopting a &#34;proactive, flexible, and controllable&#34; operational approach to reserve management and liquidity tools. This implies that the current gold sell-off is a tactical adjustment within the established policy framework, rather than a passive response to a crisis.

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To cope with surging energy bills and depreciation pressure on the lira triggered by the Iran war, Turkey's central bank sold over 118 tons of gold (valued at approximately $20 billion) in two weeks. Analysts suggest this scale is equivalent to 15% of its accumulated reserves over the past six years. Last week alone, nearly 70 tons were sold, marking the largest weekly decrease since at least 2013

- Turkey's central bank has significantly reduced its gold reserves by over 118 tons in two weeks, amounting to nearly $20 billion, marking the largest weekly decline since 2013.  
- The gold sell-off aims to stabilize the lira amid rising energy prices due to the Iran conflict, with estimates suggesting about 15% of Turkey's total gold reserves were utilized.  
- Central bank officials defended this tactical adjustment, indicating it reflects a proactive and flexible approach to reserve management rather than a reactive crisis response.

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Turkey Sells 118 Tons of Gold in Two Weeks, Valued at Nearly $20 Billion