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Gold imports in Turkey increase fivefold in second quarter amid economic uncertainty

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A dramatic increase in Turkish gold bar and coin demand in the second quarter of 2023 marked a fivefold surge, setting new records, the Scrap Monster news website reported, citing the Gold Demand Trends Report by the World Gold Council (WGC).

During the first half of 2023, gold demand peaked at 98 tons, while gold jewelry demand experienced its fourth sequential double-digit increase, rising by 23 percent to 10 tons in Q2. With a total demand of 20 tons in H1, there was a notable year-on-year increase of 25 percent, the highest recorded in the past five years.

Historically, Turkish gold demand has shown a consistent upward trajectory. Since 2020, Turkish bar and coin demand represented roughly 9 percent of the global tally. This marked increase is nearly twice the average 4 percent share observed from 2010 to 2020.

This surge can be attributed to mounting concerns over high inflation, low interest rates and Turks’ distrust of the local currency, Turhan Bozkurt, the former business editor at Turkey’s now-closed Zaman daily and a current YouTube influencer with a channel followed by 176,000 focusing on economy-related news, told Turkish Minute.

According to the WGC report published on Aug. 1, despite sales from Turkey’s central bank, the 103 tons of gold purchased by central banks in Q2 is in line with the underlying positive trend towards gold among central banks.

According to Bozkurt, while the global trend for central banks is to buy gold, the Turkish central bank is selling gold, indicating the political pressure to keep the foreign exchange rates in check while trying to preserve the import-export balance.

The WGC forecasts that investment demand for gold will remain strong. Despite the Turkish government’s recent restrictions on gold imports, the WGC believes the continuation of such policies largely hinges on the health of Turkey’s broader economy and its foreign exchange position.

A decision published in the Official Gazette on Aug. 8 announced that Turkey would levy an additional 20 percent charge on specific gold imports. This move is a bid to mitigate the adverse effects on its current account balance. In particular imports sourced from countries outside the European Union, or those without a free trade agreement with Turkey, will face this surcharge. Notably, the extra charges will apply to gold jewelry products and parts, and to some base metal products plated with precious metals.

This policy intervention comes as Turkey’s current account deficit soars, exacerbated mainly by heightened gold and energy imports. Standing at a whopping $37.7 billion in the first five months of 2023, this deficit marked a 44 percent upturn compared to the same period last year.

Adding another layer to the regulatory framework, the state-owned Anadolu news agency reported on Aug. 7 that the Turkish government is mulling over quotas on unprocessed gold imports, as cited by an unidentified source.

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