Good as Gold: Turkey Uses Bullion to Stabilize Its Economy
The comments below are an edited and abridged synopsis of an article by Simon Constable
Turkey’s economy has been in a tailspin with an inflationary currency, but the country is using something rare to help stabilize itself: gold.
In late 2011, Turkey started to allow commercial banks to use gold instead of the Turkish lira for their required deposits at the central bank. These deposits are known as reserve requirements and help ensure that the banks are capitalized.
Over recent years, Turkey’s central bank has accumulated an additional 400 tonnes of gold. That’s a lot—more than Britain has—and the sizeable stash could take the edge off the crisis.
To put the Turkish gold haul in perspective, there are 10 million ounces of gold (roughly 311 tonnes) at the Bank of England. The burgeoning balance comes as a result of a change in banking rules.
In simple terms, the tweak to the rules allows gold to be used as a financial asset by the banks. In addition, the new regulation helped flush out a lot of gold that was previously held privately.
As a result, Turkey’s central bank has seen a huge jump in its apparent gold holdings.
There are now more than 18 million troy ounces of bullion deposited at Turkey’s central bank, up from less than four million before the rule change was introduced in 2011. There are 32,150.7 troy ounces in a tonne.
Constable discusses private gold deposits into Turkey’s central bank, and Turkey’s economic problems.