Gold Surges To Record In Turkey and Other Emerging Markets as Currencies Collapse

Gold Surges To Record In Turkey and Other Emerging Markets as Currencies Collapse

  • Turkey's election angst, geopolitical risk and collapse of the lira is driving up demand for gold
  • Turkish lira has collapsed versus gold and now the lowest on record (see chart)
  • Significant demand for gold coins in Turkey and central bank has repatriated gold and added to gold reserves
  • “Having the gold physically at home allows countries to feel like they are in control of their reserves” Dr Brian Lucey
  • Gold acting as a hedge and has been "expensive" not to own gold in Turkey, Syria, Venezuela, Argentina, Angola, Russia and many other countries in the Middle East, Asia, South America, Africa and Europe (see table of worst performing currencies in 2018 including the Swedish krona)

With just a month until elections, shopkeepers at Turkey’s biggest bazaar say they’re seeing a jump in demand for gold coins.

“Turkish people have an interesting behavior -- they buy gold when the prices are rising, they think it’s gonna rise more,” said Gokhan Karakan, 32, who runs a gold exchange office in the heart of Istanbul’s Grand Bazaar. “People think there is a trend here and choose to buy gold until uncertainty is out of the way.”

On Friday afternoon, at the Grand Bazaar -- one of the world’s oldest covered markets -- shopkeepers said more customers were buying gold, instead of selling it, in hopes that the metal will keep its worth as the value of the lira plunges.

Gold priced in lira is more "expensive" than ever, but that’s not deterring buyers, who are looking for a safe haven.

“Turkish people love gold,” said Tekin Firat, 30, who owns and runs a gold store the bazaar. “People think that it will never lose in the long run.”

Citizens are buying up gold as the lira plunges in latest currency crisis. Recep Tayyip Erdogan, who’s about to launch a re-election campaign that may provide the toughest electoral test of his 15 years in power, is an outspoken advocate of cheap money. He’s up against investors demanding higher returns to fund an economy beset by inflation and a swollen current account deficit.

Gold has a special importance in Turkey. The country is to home the ancient kingdom of Lydia, where the earliest known gold coinage originated in the 7th century B.C.

Turkey imported 118 metric tons of bullion, worth $5 billion at today’s prices, in first four months of this year, the most over that period, according to data going back to 1995 from the Istanbul Gold Exchange. Last year, imports reached a record.

It’s not just consumers that are snapping up gold. Official reserves have also increased over the past year. The central bank doesn’t comment on its gold strategy, but previously said the changes in its holdings are part of an effort to diversify its reserves.

The reported figure may be misleadingly high because the central bank allows commercial banks to deposit gold as part of their reserves. The government last year launched a campaign to get more “under-the-pillow gold” into the formal banking system. About half of the 216 ton inflow since the start of 2017 can be attributed to this alternative source, according to Matthew Turner, a strategist at Macquarie Group Ltd. in London.

Even so, the purchases have happened a year after Erdogan urged Turks to convert their foreign currency savings into liras and gold, and tensions with the U.S. reached a new low.

“The central bank certainly has been more active in the gold market,” said Turner. “It seems the government would like a larger share of its reserves in assets that’s not related to the U.S. dollar.”

In 2017, the central bank withdrew of its 28.7 tons of gold, worth about $1.2 billion, from Federal Reserve vaults. It didn’t say where the gold went, but holdings increased at Borsa Instanbul, the Bank of England and Bank of International Settlements, according to a report released in April.

The decision for any country to withdraw gold from U.S. vaults is rare -- happening only a handful of times in the past decade. Since 2011, Germany, the Netherlands, Hungary and Venezuela have repatriated their gold holdings from the U.S.

Turkey’s decision to withdraw gold may have been a reaction to U.S. court cases against Turkish banks for alleged deals struck with Iran, said Cagdas Kucukemiroglu, a Middle Eastern gold analyst at research firm Metals Focus.

“Having the gold physically at home allows countries to feel like they are in control of their reserves,” said Brian Lucey, a professor of finance at Trinity Business School in Dublin.

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News and Commentary

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Turkey's Election Angst Is Driving Up Demand for Gold (Bloomberg.com)

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The great buy-to-let sell up (MoneyWeek.com)

'American Default': If gold won't go up, push the dollar down (Part 3) (Bloomberg.com)

 

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Gold Prices (LBMA AM)

24 May: USD 1,296.35, GBP 967.73 & EUR 1,104.88 per ounce
23 May: USD 1,294.00, GBP 967.91 & EUR 1,102.88 per ounce
22 May: USD 1,293.90, GBP 961.24 & EUR 1,095.29 per ounce
21 May: USD 1,285.85, GBP 959.24 & EUR 1,095.67 per ounce
18 May: USD 1,287.20, GBP 954.20 & EUR 1,091.16 per ounce
17 May: USD 1,288.85, GBP 952.07 & EUR 1,090.50 per ounce

Silver Prices (LBMA)

24 May: USD 16.51, GBP 12.32 & EUR 14.09 per ounce
23 May: USD 16.53, GBP 12.38 & EUR 14.11 per ounce
22 May: USD 16.58, GBP 12.32 & EUR 14.04 per ounce
21 May: USD 16.34, GBP 12.19 & EUR 13.91 per ounce
18 May: USD 16.39, GBP 12.16 & EUR 13.92 per ounce
17 May: USD 16.39, GBP 12.14 & EUR 13.90 per ounce


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Comments

cheech_wizard Fri, 05/25/2018 - 10:26 Permalink

Someone actually named their fiat kwanza?

Is it any wonder that on several occasions during the 1990s, Angola's currency was the least valued currency unit in the world.

 

BobEore Lie_Detector Fri, 05/25/2018 - 22:53 Permalink

Somebodies 'lie detector' just went bust. 

In "these countries"  - and the one in the spotlight here in particular - the 'story behind the [bullshit]story is indeed -

"paper gold"... 

which is what the mentioned 'under the pillow' gold retrieval program is/was all about. Tardnationals fave jihadi regime started way back in 2011 to pressure its citizen/victims to give up their real gold for 'paper gold' accounts - which gave back only lira. Gormless gold gurus in GULAGISTAN gloated about a program which is the very epitome of theft of value... stoking the witless imaginations of their impoverished fanboys that something 'good' was going on for gold.

\and they still follow the pie-eyed pipers/to the land of perdition. No real gold being 'bought' by bankrupted turks with no savings to buy it with. No 'real gold reserves' left in central bank coffers. No 'real gold' repatriation either... only a 'repayment' of existing debt to hungry creditors offshore. 

https://www.calameo.com/accounts/5588857

As I watched the value of my 'real gold' - bought in Turkish lira all those years ago - tick over 200tl to the gram this week ....now 216% above my buy in level... I spared a brief moment to recollect all the years of my telling retards how to go about getting out whole ... instead of getting wholly fukked, by listening to fake gold gurus spouting lies paid for by the very banksters who were supposedly their 'enemies,' 

and reflected on the grisly fate of all the 'special geniuses' I had met along the way - on "silverproctologists.com" and "genius-on-a-ledge.com. Lying lie detectors and crying reality defectors all. 

Hurrah!

In reply to by Lie_Detector

captain whitewater Fri, 05/25/2018 - 13:27 Permalink

Hey Warren, wanna remind us all how gold is just a barbarous relic?  Not so everywhere else where government spending and endless wars have ruined fiat currency.

I would say the people of Turkey know something you don't. This is because your mouth has always been buried in the feedbag of the US Treasury.

BobEore captain whitewater Fri, 05/25/2018 - 22:59 Permalink

Yes indeed. We know never to trust a politician with big plans to 'help the lil guy'... or westerlings with exceptionally distorted ideas about how much they know about what is really going on outside their own 'shithole.' 

We know... indeed... that you know nothing - NOTHING AT ALL - of what you speak... but will spout off endlessly, anyways... till your final trip to Moes' Abattoir and Recreation Center for weirdo westerlings. 

Good luck chump

In reply to by captain whitewater