Bloomberg reported last week that Turkey sold and swapped a total of nearly 60 tons of gold due to the US-Israel war on Iran which is putting a strain on “Turkey’s disinflation strategy, which relies heavily on maintaining a stable or steadily depreciating lira, including with hard-currency interventions, usually via state-run banks. Rising energy import costs and increased dollar demand since the conflict began have made that approach more challenging to maintain.” The Istanbul Post reports that the Lira is now trading 44.44 to the dollar. Back in 2022 one US dollar bought 18.3866 lira.
The yellow metal’s price has fallen from over $5,600 per ounce in January to just below $4,100 last week before rebounding. Turkey had been an aggressive buyer of gold accumulating $135 billion of the metal in its de-dollarization strategy. Iris Cibre, the founder of Phoenix Consultancy in Istanbul “estimated total sales at 58.4 tons, with more than half of that conducted via gold-for-foreign-exchange swaps abroad.”
“This conflict happens to result in pretty significant economic damage for Middle Eastern nations, who have been some of the participants participating in the official sector gold purchases,” Daniel Ghali, senior commodity strategist at TD Securities told Bloomberg. “We expect that, while Turkey grabbed the headlines, this is probably a more prevalent trend across energy-import nations.”
Another cost of war, trading gold for paper.
Doug French
Fernando Chiocca
Hans-Hermann Hoppe
Jay Baykal
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PFS
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Tom DiLorenzo