Sold 81 tons of gold
Global central banks' gold holdings fell for the first time in more than a year in April, as Turkey sold more than 80 tonnes of gold, the World Gold Council (WGC) said in a report.
Total central bank gold reserves fell by 71 tonnes in April. The report pointed out that the last time central bank gold holdings fell was in March 2022, when the net decline was one tonne.
Krishan Gopaul, senior analyst at the WGC, said the monthly decline was not a sign of a trend reversal. “The country-level data shows that, far from a sudden wave of central bank selling, the decline in reserves was largely driven by Turkey,” Gopaul said on Friday.
Although after 1 year, the price of gold in US dollars only increased by about 10%, a "shark" sold 81 tons of gold and made a profit of up to... 80%. Illustrative photo
The Turkish Central Bank sold 81 tonnes of gold in April, reducing its holdings to 491 tonnes. This comes after the central bank sold 15 tonnes in March.
Last year, Türkiye bought the most gold of all central banks, buying 148 tonnes and increasing its gold reserves to 542 tonnes – the highest on record.
The report explains that country-specific circumstances have forced Türkiye to sell some of its gold.
“This is a specific response to local dynamics rather than a change to their long-term gold policy: gold is being sold into the Turkish domestic market to meet very strong demand for bars, coins and jewellery following the temporary ban on bullion imports,” the report noted. “It remains to be seen whether these sales will continue and, if so, at what pace.”
Other sales in April were significantly smaller. The National Bank of Kazakhstan sold 13 tonnes, the Central Bank of Uzbekistan sold 2 tonnes and the National Bank of the Kyrgyz Republic sold 0.6 tonnes.
While massive gold selling is unlikely to become a new trend, central bank gold buying is slowing.
Only four central banks bought gold in April, with Poland reporting an additional 15 tonnes, the People's Bank of China buying 8 tonnes (its sixth consecutive monthly purchase), the Czech National Bank buying 2 tonnes and the Central Bank of Mongolia buying an additional amount of gold.
The WGC is looking at a decline in central bank gold holdings in April and expects more purchases throughout 2023.
“Our view is also supported by findings from our latest Central Bank Gold Reserves survey, which shows that reserve managers remain broadly positive on gold,” said Gopaul. “It is worth noting that the Central Bank of Iraq recently announced a 2.5t purchase in May, signaling more to come.”
80% profit after one year
Turkey has seen a surge in demand for gold over the past year as people use the precious metal as a hedge against inflation, political and economic instability and currency devaluation.
“Local gold demand in Türkiye is simply a desire to protect their purchasing power from the falling lira,” William Stack, financial advisor at Stack Financial Services LLC, told Kitco News. “Gold is a great asset to own when you are in financial trouble because it can be sold when needed.”
The surge in gold demand has led to a surge in gold imports, putting pressure on Türkiye’s widening current account deficit. In response, Türkiye took steps to limit gold imports in February and began selling its gold reserves to meet domestic demand.
However, the move to offload some of their gold is not necessarily a losing proposition for the Turkish Central Bank, Stack pointed out.
“One reason Türkiye is selling is that gold is up 10% year-on-year in dollar terms. In lira terms, the increase is even more impressive (70-85%). If Türkiye were to sell gold internationally, it would weaken the lira even more. But when they sell gold to Turkish residents for lira, it reduces the amount of lira on the market, thus strengthening the currency,” he explained.
Hoang Tu/According to KitcoNews
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