Turkish Appetite for Gold Returns with a Vengeance

Why Turkey's Appetite for Gold Returned with a Vengeance

SKG Recco-Read Rating: 4 of 5

Trading Tip: Central Banks buy weakness not strength in gold before their own currency is debased. In countries where state controls are strong like China, India, and Turkey: The public generally buys their Gold in a panic after the countries currency has already fallen. And then the state steps in to limit, confiscate, or otherwise impeded the price spike to keep demand down adn their own Bank's ability to buy possible.- VBL

President Erdogan and the Turks appear to have had a dramatic change of heart towards the barbarous relic starting in November of last year, and escalating most recently as Zerohedge reports. 

To this Vince Lanci of SKG adds

They have never imported a greater value of gold than in the last 12 months. This is concurrent with the devaluation of the Turkish Lira for sure. But it is Gold they are flying to for safety, not the USD. Likely dollar bears will say this is because of the imminent death of the USD, and in the macro we agree. But this is also a calculation based on ability to conduct future trade with other  partners. I partially inoculates Turkey from  any actions like  "freezing accounts" in conjunction with embargoes etc. 

If you are Turkey, and are operating a criminal  state, or expect to be treated as one unjustifiably; then you must protect your ability to transact business, preserve wealth, and if need be transfer it to the  requested currency to conduct future trade. This is the same motivation behind Gold "backed" Yuan and Gold for Oil deals going on between Iran, Russia, and China. 

Bitcoin is also likely a good way to do this as a transfer method. But the BIS can impede use of anything transacted electronically, and will do so down the line.

Gold is the safe space while the outcome of events governing trade are in flux.


Addditionally, as Bloomberg reports, Bar and coin purchases, a measure of investment demand, were 47 metric tons so far in 2017, compared with 14.8 tons in the same period a year ago, according to a report from the World Gold Council published Thursday.

The weak lira and “President Erdogan’s pro-gold comments in November last year continued to lend support to the market,” the gold council said.

 Turkey’s central bank is also buying gold, increasing purchases by 30.4 tons during the third quarter.

While the central bank has cited a good old-fashioned diversification policy, some analysts speculated that the country could be shoring up reserves amid rising tensions between Turkey and its traditional Western allies.

A year ago, President Recep Tayyip Erdogan urged Turks to prefer gold to the U.S. dollar as a savings vehicle, and asked the central bank to support that policy.

And gold is doing exactly what it should do as faith in fiat falters.

The question is - just like in India - how long before Erdogan 'dictates' an end to gold imports, imposes tariffs, or confiscates the precious metal?

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