In the two weeks following the outbreak of the Iran war, the Central Bank of the Republic of Turkey sold and swapped approximately 60 tons of gold, valued at over $80 billion, intensifying downward pressure on gold prices.

According to the latest data released by the central bank, Turkey's gold reserves decreased by 6 tons in the week of March 13th, followed by a further reduction of 52.4 tons in the week of March 20th, indicating a sharp contraction in reserves. Sources familiar with the matter revealed that a portion of this involved direct sales, while the majority was conducted through swap agreements to obtain foreign currency or lira.

The Central Bank declined to comment.

This action comes as Turkey's disinflation strategy faces mounting pressure. The bank's strategy heavily relies on maintaining a stable or smoothly depreciating lira, employing methods such as hard currency interventions via state-owned banks. Since the conflict began, rising energy import costs and increasing demand for US dollars have made sustaining this strategy more challenging.

Iris Hibret, founder of Istanbul-based Phoenix Consultancy, stated that officials utilized gold from the central bank's $135 billion reserves for sales and swap arrangements to meet liquidity needs and stabilize domestic demand. She estimated the total sales at 58.4 tons, with more than half conducted through "gold-for-foreign-currency" contracts overseas.

It is not uncommon for a central bank to sell spot gold while simultaneously agreeing to repurchase it in the future via swap agreements, essentially using the precious metal as collateral to secure low-cost US dollar financing.