Turkey adds another 9 tonnes of gold, retaining its top buyer spot

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• Buying spree comes at time of economic uncertainty 
• Gold seen as a safe haven but interest rate hikes dampen appeal

Turkey added another nine tonnes of gold to its central bank reserves in August, building on the fact that it has been the biggest buyer of the precious metal this year, boosting its reserves by 83.8 percent in 2022.

“Gold-related activity among central banks was muted in August; only a handful of banks meaningfully contributed to the overall monthly total,” Krishan Gopaul, senior analyst at the World Gold Council (WGC), said in a press statement.

Turkey’s additional nine tonnes, a month-on-month increase of 8.9 percent, brought its haul of gold so far this year to 84 tonnes. This year its reserves have increased 83.8 percent to 478 tonnes, the highest level since the second quarter of 2020.

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Turkey’s buying spree comes at a time of great economic uncertainty for the country. Inflation has soared to a 24-year high and the country’s currency, the lira, has shed more than half its value versus the dollar in two years.

Goldman Sachs earlier this month forecast that Turkey’s 2022 GDP growth would be 5.5 percent in 2022, up from 3.5 percent, but it estimated that the country would run a current account deficit of $45 billion.

President Recep Tayyip Erdogan’s government is boosting its gold reserves at a time when it is easier to buy the precious metal. While the price rose slightly on Friday, bullion was heading for its biggest quarterly decline since March 2021.

“The slowdown of the US dollar is supporting gold,” Carlo Alberto De Casa, external analyst for Kinesis Money, told Reuters.

While gold is seen as a safe haven in times of uncertainty, interest rate hikes traditionally dampen the appeal of bullion, Reuters said.

However, Ajay Kedia, director at Kedia Commodities in Mumbai, said the coming months will see more demand for physical gold in India and China, so the outlook was more positive.

Dubai-based Vijay Valecha, chief investment officer at Century Financial, pointed out that the fact that Jerome Powell, chair of the Federal Reserve of the United States, has confirmed that he “will remain hawkish for the remainder of 2022” means that “high inflation rates will keep on pressuring gold”.

Gold’s biggest buyers of 2022

Country	Increase	Reserves
Turkey	83.8%	478.2 tonnes
Egypt	44.3%	125.2 tonnes
Iraq	33.9%	130.3 tonnes
India	27.2%	781.3 tonnes
Uzbekistan	19.3%	381.3 tonnes
Qatar	15.6%	72.3 tonnes
Argentina	7%	61.7 tonnes

Gulf countries reserves

Country	Reserves	% of total reserves
Saudi Arabia	323.1 tonnes	3.7%
Kuwait	79 tonnes	8.5%
Qatar	72.3 tonnes	9.4%
UAE	55.8 tonnes	4.2%
Bahrain	4.7 tonnes	5.9%

Sources: IMF IFS, Respective central banks, World Gold Council.
Information for Oman was not available.