The Central Bank of the Republic of Turkey has utilized approximately 60 tonnes of gold, valued at over $80 billion, through direct sales and swap operations, according to a Bloomberg report. This action has exerted downward pressure on gold prices.

Newly released data indicates a significant reduction in the Turkish central bank's gold reserves, which fell by 6 tonnes in the week of March 13th and by a further 52.4 tonnes in the week of March 20th. Sources familiar with the matter stated that a portion of this gold was sold directly, while the majority was used in swap agreements to obtain foreign currency or lira liquidity.

The scale of the gold sales by Turkey's central bank surpassed the outflows from gold-backed exchange-traded funds (ETFs) during the same period. Data from Bloomberg shows that gold ETFs experienced outflows of approximately 43 tonnes over the same two-week span. ETFs are a primary method for both institutional and retail investors to gain exposure to gold.

A prior Bloomberg report on Tuesday indicated that the Turkish central bank was considering utilizing its gold reserves through transactions in the London market to prevent a further sharp depreciation of the lira amidst wartime conditions. This news initially caused the global spot gold price to turn from gains to losses that day. Analysts suggest this implies that Turkey's gold sales may persist.

This sell-off marks a notable shift in Turkish policy. Over the past decade, Turkey has been one of the world's most active gold buyers, aiming to reduce its reliance on US dollar-denominated assets. Gold prices have declined by approximately 15% this month, following significant gains since last year, leading investors to take profits.

For central banks, simultaneously selling physical gold while entering into swap agreements to repurchase it at a future date is not uncommon. This effectively amounts to using gold as collateral to obtain low-cost US dollar financing.

According to a Tuesday report from JPMorgan Chase & Co. economist Fatih Akcelik, Turkey holds roughly $30 billion worth of gold reserves at the Bank of England. The Turkish central bank can utilize these reserves for foreign exchange intervention without logistical constraints.