The Turkish Lira has been on a steady decline since 2000, but it’s fall accelerated last year when President Erdogan declared himself “Sultan for life.”
This acceleration also coincided with an unprecedented, and seemingly panic-driven, increase in gold imports.
According to a report by Middle East media channel AL MONITOR:
“In times of economic strain, one of the first solutions that Turkish governments propose is to lure the gold that citizens keep ‘under the mattress’ into the economy.”
Turkish citizens are holding close to $100 BILLION in gold savings according to Turkish Deputy Prime Minister Mehmet Simsek. With Turkey’s foreign reserves undergoing depletion–sinking to levels below what the International Monetary Fund would consider a serious economic risk—Erdogan urged citizens to help prop up the national currency by converting their foreign exchange holdings to either lira or gold–all to no avail.
The drop in reserves coincides with an uptick in the gold trade with the UAE–a critical link between the oil-for-gold trade between Turkey and Iran, and a prospect for both China and Russia in a wider scale oil-for-gold trade with BRICS nations.
Turkey’s gold imports have increased eight-fold from $354 million last year to $2.8 BILLION. In June gold imports were up $2.1 billion, according to state statistics agency Turkstat–a 216% year-on-year increase. According to the World Gold Council, Turkey had recently moved from 15th to the 13th place on the global reserve ranking.
If anything, this underscores the pivotal role that gold continues to occupy in the current geopolitical monetary environment. As for Erdogan, it will be interesting to see how, in the months ahead, he will utilize Turkey’s gold reserves as a strategic element toward shaping domestic and international policy and relations.
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