Central Bank 'Gold' shift: $74 billion sold in one week
According to assessments by 12punto columnist Prof. Dr. Duran Bülbül, there was a notable decline in CBRT reserves during the first half of March. A $22 billion drop in net reserves excluding swaps and a sharp decrease in gold reserves stood out.
12punto
There was extraordinary activity in the Central Bank of the Republic of Turkey (CBRT) reserves during the first half of March. According to the picture highlighted by Prof. Dr. Duran Bülbül in his statements to 12Punto, the government has engaged in large-scale reserve sales to suppress the exchange rate and manage the effects of the economic crisis.
Regarding the issue, Professor Dr. Duran Bülbül stated the following:
We are the country most economically affected by this war. If it lasts longer, it will accelerate the depletion of Central Bank resources. The effect of this will create a stagflationary impact; on one hand, inflation, high taxes, and interest rates, and on the other, deflationary contraction and rising unemployment. High price increases are inevitable. Every tax and every price increase will bring impoverishment with it.
Speaking about gold exchange prices in the market, Bülbül noted that there is a 500 TL price difference per gram, stating, 'It is being portrayed as if gold has fallen. However, the situation is not like that at all'.
SHARP DIFFERENCE BETWEEN TWO DATES
When comparing the data from March 6 and March 19, the change in the Central Bank's "arsenal" was reflected in the figures as follows:
Data Item (Billion $) | March 6 | March 19 | Change |
Gross Reserve 197.5 | 177.5 | -20.0 |
Gold Reserve 134.7 | 116.1 | -18.6 |
Foreign Exchange Reserve 62.8 | 61.4 | -1.4 |
Net Reserve 78.8 | 57.4 | -21.4 |
Net Reserve Excluding Swaps 65.0 | 43.0 | -22.0 |
WHY ARE GOLD RESERVES MELTING?
The most striking detail in the data was the sharp decline in gold reserves. Prof. Dr. Duran Bülbül emphasizes that approximately 52 tons (worth $74 billion) of gold were sold in just one week.
The 3 critical points indicated by this picture are as follows:
* Intervention in the Exchange Rate: In order to break the upward pressure on exchange rates, gold and foreign currency assets, which represent "real" liquidity rather than gross reserves, are being released into the market.
* Blood Loss in Net Reserves: The decline of net reserves excluding swaps from $65 billion to $43 billion shows the extent of the contraction in the Central Bank's own resources.
* War and Regional Risks: The pressure of the war in the nearby geography on the Turkish economy is causing reserves to be used more aggressively as a "buffer mechanism."
> Editor's Note: The fact that the Central Bank experienced a $22 billion decrease in its net reserves excluding swaps in a short period of 13 days proves that the economic management is deploying its strongest instruments (such as gold) to maintain exchange rate stability.