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The Central Bank of the Republic of Türkiye (CBRT) has temporarily halted domestic gold purchases from local refineries due to rising demand pressures, worsened by a surge in global gold prices, the Turkish Gold Miners Association said on Saturday.
The decision comes amid growing concerns over supply constraints in the market due to surging demand. During the recent rally, when the spot price topped $4,300 in early October, citizens rushed to jewelry stores to acquire physical gold coins, eager to catch rising prices in anticipation of further hikes.
The skyrocketing demand also coincided with a supply crisis triggered by a corruption operation involving Türkiye's largest gold refinery, Istanbul Gold Refinery, which led to a temporary suspension of production. As a result, a widening price discrepancy between spot gold and domestic market prices emerged.
CBRT’s temporary suspension apparently aims to mitigate this imbalance and protect local businesses from the adverse effects of soaring prices, according to the association's statement.
The Turkish central bank has the preferential right to buy gold from domestic mines, paying in Turkish Lira, since a measure first introduced in 2017.
"This move may have been considered to address the negative impact caused by the price gap between global and domestic gold prices, which reached around $5,500 per kilogram due to the gold import quota introduced in 2023," the association explained.
In August 2023, Türkiye's Treasury and Finance Ministry introduced a gold import quota to reduce unprocessed gold imports. The monthly quota was set at 12 tons, 1.5 times the long-term monthly average of 8 tons. The quota is applied through licensed precious metal intermediaries and is allocated as follows: 25% for jewelry exporters, 38% for jewelry businesses, 33% for intermediaries that imported under the quota in 2022 and 2023, and 4% for intermediaries that did not import during the specified period but wish to do so under the new system.
The statement added that this move is viewed as a step toward stabilizing the economy by ensuring that local gold production meets domestic demand.
Türkiye’s non-monetary gold imports surpassed $21.65 billion by August, resulting in a $17.73 billion deficit in this category.
The association also dismissed claims that physical gold purchases have been halted. "While the temporary halt is in effect, the gold market remains active under free market conditions, and some claims that gold sales have ceased entirely are false," it said.
Türkiye is one of the world's largest gold buyers, with Turkish households estimated to hold around 3,100 tons of gold physically.
The Central Bank of the Republic of Türkiye (CBRT) was one of the top gold buyers this year, adding 21.4 tons to its reserves in the first 8 months. Bringing its total to 634.76 tons, the bank ranks 8th globally in gold reserves, according to the World Gold Council.
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