Selling 81 tons of gold
Gold holdings by global central banks fell for the first time in more than a year in April, when Turkey sold more than 4 tonnes of gold, the World Gold Council (WGC) said in a report.
Total central bank gold reserves fell by 71 tons in April. The report indicates that the last time the central bank's gold holdings decreased was in March 3 and the net decrease was one tonne.
Krishan Gopaul, senior analyst at WGC, said the monthly drop is not indicative of a trend reversal. “Country-level data reveal that, far from the sudden wave of central bank selling, the reduction in reserves is mainly due to Türkiye,” Gopaul said on Friday.
Although after 1 year, the price of gold in US dollar terms only increased by about 10%, but a "shark" sold 81 tons of gold and made a profit of… 80%. Illustration
The Central Bank of Türkiye sold 81 tons of gold in April, reducing its gold holdings to 4 tons. This comes after the central bank sold 491 tonnes in March.
Last year, Turkey bought the most gold of all the central banks, buying 148 tons and increasing its gold reserves to 542 tons – the highest on record.
The report explains that country-specific circumstances prompted Türkiye to sell some of its gold.
“This is a specific response to local dynamics rather than a change to their long-term gold policy: gold is sold into Türkiye’s domestic market to meet very strong demand for bars, coins and jewelry following the temporary ban on bullion imports,” the report notes. “It remains to be seen whether this sale will continue and, if so, at what rate.”
Other sales in April were significantly smaller. The National Bank of Kazakhstan sold 4 tons, the Central Bank of Uzbekistan sold 13 tons and the National Bank of the Kyrgyz Republic sold 2 tons.
While massive gold selling is unlikely to become the new trend, central bank buying is slowing.
Only 4 central banks bought gold in April, of which Poland reported buying 4 tons more, People's Bank of China bought 15 tons (8th consecutive month purchase), Czech National Bank bought 6 tons more and Central Bank of Mongolia bought some more gold.
The WGC is looking at a drop in central bank gold holdings in April and expects more purchases throughout 4.
“Our view is also supported by findings from our latest Central Bank Gold Reserve survey, which shows that reserve managers generally remain positive on gold,” said Gopaul. “It is worth noting that the Central Bank of Iraq recently announced a purchase of 2,5 tonnes in May and signaled more to come.”
80% profit after one year
Turkey has seen a spike in demand for gold over the past year as people use the precious metal as a hedge against inflation, political and economic instability and the devaluation of the local currency.
William Stack, financial advisor at Stack Financial Services LLC, told Kitco News: “Local demand for gold in Turkey is simply a desire to protect their purchasing power from the falling lira. “Gold is a great asset to own when you are in financial trouble because it can be sold when needed.”
Rising demand for gold led to a spike in gold imports, putting pressure on Türkiye's widening current account deficit. In response, Türkiye took steps to limit gold imports in February and began selling gold reserves to meet domestic demand.
However, their move to drop some gold is not necessarily a loss scenario for the Central Bank of Türkiye, Stack pointed out.
“One reason Türkiye is selling is that gold is up 10 percent from a year ago, in dollar terms,” he explained. In lira terms, the increase was even more impressive (70-85%). If Türkiye sells gold internationally, that will weaken the lira further. But when they sell gold to Turkish residents for Lira, it reduces the amount of Lira on the market, thus helping to strengthen the currency.”
Hoang Tu/According to KitcoNews
