CBRT may tap gold reserves to defend lira amid Iran war volatility
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Türkiye’s central bank is reportedly preparing to deploy its sizable gold reserves as a new intervention tool to stabilize the lira amid heightened market volatility driven by the Iran war. With rising energy costs, accelerating capital outflows, and declining reserves, policymakers are exploring gold–FX swap operations in London while markets increasingly price in further interest rate hikes.
This story is not confirmed by CBRT.
Gold reserves emerge as a new policy tool
The Central Bank of the Republic of Türkiye (CBRT) is considering using its gold stockpile to support the currency, according to sources familiar with the matter.
- Planned strategy: gold-for-FX swap transactions in London markets
- Objective: strengthen FX intervention capacity without logistical constraints
Officials have not issued a formal statement.
Türkiye has built substantial gold reserves over the past decade as part of a broader effort to reduce reliance on dollar assets.
- Total gold reserves: approximately $135 billion
- Around $30 billion held at the Bank of England
This offshore gold could be mobilized more easily for market operations.
War-driven energy shock complicates policy
The Iran conflict is intensifying macroeconomic pressures:
- Türkiye imports nearly all of its energy needs
- Oil prices above $100 are increasing inflation risks
Authorities are already struggling to contain inflation, which reached 31.5% in February.
The CBRT’s policy framework—centered on achieving a real appreciation of the lira—is becoming harder to sustain as reserves decline and external shocks intensify.
Households Lose Faith in Disinflation: Sentiment Turns Grim in March
Rising costs strain FX stability
Higher import bills and energy prices are undermining exchange rate stability.
- Maintaining a stable lira is becoming increasingly costly
- External imbalances are worsening
- Investor focus remains on the current account outlook
As monetary policy space narrows, authorities are expected to introduce additional stabilization mechanisms—gold reserves now among the key options.
Reserves under pressure as crisis deepens
The Middle East crisis has significantly affected Türkiye’s reserve position.
- Oil price surge triggered liquidity tightening
- Public banks have stepped in to support FX markets
- CBRT has begun selling foreign assets
Recent developments include:
- $16 billion in US Treasuries sold in recent weeks
- Total US Treasury holdings now below $17 billion
- Down sharply from $82 billion in 2015
At the same time, foreign investors are exiting Turkish debt markets:
- Record bond outflows recorded in the week of March 13
- Capital flight is pushing yields higher and increasing financial stress
Turkey’s central bank faces triple pressure as Iran war derails policy outlook
Market distortions signal growing strain
Pressure is increasingly visible in local FX markets.
- Dollar prices in Istanbul’s Grand Bazaar exceed interbank rates
- Domestic demand for foreign currency is rising
These distortions reflect tightening liquidity and declining confidence.
Rate hike expectations strengthen
Market participants now expect tighter monetary policy.
- Anticipated rate hike: around 100 basis points next month
- Current policy rate: 37%
The CBRT has already shifted its funding strategy:
- Suspended funding at the policy rate
- Switched to a higher-cost funding window at 40%
Lira depreciation continues
The Turkish lira remains under pressure:
- Exchange rate: 44.35 per dollar (Tuesday)
- Year-to-date depreciation: steady but gradual
Source: Korkusuz Daily
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