Contradictory statements coming from the contacts between the USA and Iran, on the one hand, keep the possibility of diplomacy alive, on the other hand, they strengthen the concern that the conflict may spread to a wider area. The environment of uncertainty means serious risks for the Turkish economy. While the intense foreign exchange sales made to the market to protect the Turkish lira due to the war led to a decrease in the Central Bank’s reserves, the fluctuations in gold prices in the same period also directly affected the reserve composition. While the total foreign exchange sales since March 2 have reached 33.7 billion dollars, it is stated that the impact of these interventions on the balance sheet has become more visible.
RESERVES DECREASED
According to economist Haluk Bürümcekçi’s calculations, total reserves decreased to 161.1 billion dollars as of the end of March. Bürümcekçi also stated that the net international reserves decreased to 41.6 billion dollars. He emphasizes that net reserves, excluding swaps, decreased by 15.4 billion dollars in just a few days, reaching 28 billion dollars. It is understood that the movements in gold prices during the same period were directly reflected in the reserves. It is calculated that the fluctuations in gold prices in the period starting from March 19 to today have had a downward impact of approximately 8.1 billion dollars on the net international reserve.
“A REASONABLE STEP”
At this point, the evaluation of Hakan Kara, former Chief Economist of the Central Bank, offers a remarkable framework to understand the current picture. According to Kara, it is a “reasonable” step for the Central Bank to use some of its gold reserves. The main reason for this is that the share of gold in reserves in Türkiye is significantly above the world average.
“INTEREST EARNED”
Economist Emre Alkin, while analyzing the break in gold prices, brings the following observation to the agenda: “In the past, when war broke out, investors would flee to gold. Today, the same investor first asks the following question: ‘What is the interest rate?’ If interest is high, gold falls into the background. The world has changed, so the role of gold has changed too. This is exactly what happened in the Iranian war; The war pushed the price up, but high interest rates and a strong dollar put serious pressure on gold. These two forces collided and gained interest in the short term. JPMorgan sees it as possible to stay above $6,000, while Goldman Sachs and Citi see it as possible to stay above $5,000. “The current price range may not be a weakness, but a search for a new balance.”
INCREASE IN FOREIGN EXCHANGE DEMAND
“STRUCTURAL STEP IS A MUST”
While drawing attention to the importance of structural steps, Duran said, “The activation of gold reserves in the short term may alleviate this pressure to some extent. However, it is clear that more permanent solutions are needed in the medium and long term.” “Structural steps such as strengthening reserves, increasing external financing inflows and reducing energy dependency will be decisive in terms of the sustainability of this process.” he warned.
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