Turkey's Central Bank Sells Record 118 Tonnes of Gold

EVENT OVERVIEW

Turkey’s central bank has liquidated or swapped more than 118 tonnes of gold reserves in just two weeks—the largest drawdown since at least 2013—while selling $26 billion in foreign currency to defend the lira and markets amid surging energy prices and capital flight from the Iran conflict. Net international reserves have already fallen $35 billion since the war began.

Turkey’s central bank has executed the most aggressive reserve drawdown in over a decade. Gold holdings fell 49.3 tonnes in the week to 26 March and another 69.1 tonnes the following week, taking the stock to 702.5 tonnes. Bankers’ calculations show roughly 48 tonnes outright sold and 73 tonnes used in gold-backed lira/forex swaps over the fortnight.

The trigger is clear: the 28 February Israel-US strike on Iran triggered immediate market volatility, energy price spikes, and heavy capital outflows. The central bank responded with $26 billion in forex sales plus gold operations to inject liquidity and cap lira depreciation. A concurrent ~10% drop in global gold prices shaved a further $8 billion off the value of remaining holdings, amplifying the headline reserve decline to $18 billion in the first reported week alone. Gross forex reserves rose $5.8 billion last week (likely from swap inflows), yet total reserves still dropped $12.2 billion to $177.5 billion. Net reserves are down $35 billion since hostilities began.

Governor Fatih Karahan explicitly defended the strategy as “proactive, flexible, and controlled” ahead of London investor meetings. The central bank declined to comment on the underlying calculations. The moves mark a decisive shift from Turkey’s multi-year policy of gold accumulation to active deployment of the reserve buffer under geopolitical stress.

▸ Immediate liquidity injection into Turkish banking system via gold sales and swaps, temporarily stabilising TRY and short-term funding rates.
▸ Direct addition of ~48 tonnes physical gold supply to global market, contributing to the observed 10% price drop.
▸ $26 billion forex sales and $35 billion net reserve loss signal accelerated capital outflow management since 28 February.
▸ Total reserves fall to $177.5 billion reduces the central bank’s immediate buffer against further external shocks.
▸ Lira volatility capped in the short term, but at the explicit cost of reserve quality.

→ Domestic dollarisation accelerates as households and corporates observe the central bank itself liquidating gold, reinforcing preference for hard assets over TRY deposits.
→ Higher energy import bill from sustained oil/gas prices feeds directly into Turkey’s current-account deficit, forcing further reserve usage or rate hikes later in 2026.
→ Regional EM central banks quietly reassess gold’s role in their own portfolios after watching Ankara deploy its buffer aggressively.
→ London and Zurich bullion desks see one-off margin boost from Turkish physical flows, but counterparty risk premia on gold swaps with Turkish banks widen.
→ Short-term relief in Turkish credit spreads reverses if investors reprice the depleted reserve cushion ahead of May local elections or rating reviews.

◆ Consensus narrative that “geopolitical risk is gold-positive” is already being falsified by EM central-bank selling; the next leg of any war de-escalation could trigger an outsized gold price washout as more reserve managers follow Turkey’s lead.
◆ Turkey’s rapid shift from gold hoarder to active seller marks the end of the post-2018 reserve-rebuilding cycle and opens a multi-quarter window for structurally higher Turkish local-currency yields—creating an asymmetric long opportunity in TRY bonds once the initial panic subsides.
◆ Persistent reserve depletion raises the probability of an eventual IMF-style programme or capital controls by late 2026; markets are currently pricing only temporary liquidity stress, not regime change.
◆ Gold’s safe-haven premium is being repriced in real time: physical buying in Asia and the Middle East may diverge sharply from Western ETF flows that are still reacting to the war headline rather than actual supply/demand mechanics.
◆ Long-term structural winner: non-Turkish energy exporters and gold producers with low geopolitical beta; the clearest underpriced trade is short-term long energy volatility versus short gold futures once the current selling wave exhausts itself.

Turkey’s Central Bank Sells Record 118 Tonnes of Gold

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