A startling figure has emerged in global financial markets: Turkey's central bank sold approximately 58.4 tons of gold, worth over $8 billion, within just two weeks. During the week of March 13, gold reserves fell by 6 tons, followed by a sharp decline of 52.4 tons in the week of March 20.
Weekly data from the Turkish central bank clearly illustrates this trend: from March 13 to 19, the market value of gold reserves plummeted from $134.1 billion to $116.2 billion, a single-week evaporation of nearly $18 billion. Meanwhile, foreign exchange reserves, excluding gold, increased by $5.8 billion over the same period. The contrast between the decline and the rise unmistakably indicates a "gold-for-foreign-currency" operation.
Over the past decade, Turkey has been one of the world's most aggressive gold buyers, with its gold reserves growing from 116 tons in 2011 to over 820 tons. Why would the country suddenly sell off such a significant portion of its hard-earned reserves within two weeks? The answer boils down to three words: survival.
The trigger was a war that pushed Turkey into a "perfect storm." On February 28, the United States and Israel jointly launched a military operation code-named "Epic Fury," conducting airstrikes on Iranian nuclear facilities, military bases, and government buildings. Iran retaliated by effectively blockading the Strait of Hormuz, a critical passage for 20% of the world's seaborne oil and 20% of LNG trade. Brent crude oil surged from $73 per barrel before the conflict to over $106, a more than 40% increase, prompting the International Energy Agency to label it the "most severe global energy security challenge in history."
For most countries, this was a shock; for Turkey, it was an existential crisis. Turkey relies on imports for 90% of its oil and 98% of its natural gas. Every $10 increase in oil prices widens its current account deficit by $4.5 to $7 billion. Based on post-war oil prices, the annual energy import bill could surge by approximately $15 billion.
A more devastating blow came on March 24, when Israel attacked Iran's South Pars gas field, leading Iran to halt natural gas exports to Turkey. Iran is Turkey's second-largest pipeline gas supplier, accounting for about 13% to 14% of its natural gas imports. The 25-year contract for this pipeline is set to expire in July 2026, and the war has effectively eliminated any prospect of renewal. In short, Turkey faces a doubled energy bill, a critical gas supply cut-off, and no short-term equivalent replacement.
The transmission chain began with foreign exchange reserves buckling under pressure. Energy imports are settled in U.S. dollars, prompting importers to scramble for dollars and causing the lira to plummet. Within 16 trading days since the conflict began, the lira hit record lows against the dollar 11 times, reaching approximately 44.35 lira per dollar on March 25. This decline was driven by accelerated foreign investor withdrawals: $4.7 billion flowed out of Turkish bonds in three weeks, $1.2 billion left the stock market, and carry trade positions shrank from a record $61.2 billion in January to below $45 billion.
The Turkish central bank was forced to launch a "lira defense campaign," selling over $8 billion in foreign exchange in the first week of March alone. Over the three weeks leading up to March 19, the bank depleted approximately $25 to $30 billion in foreign exchange reserves. Net reserves, after deducting swaps, plummeted from $54.3 billion before the conflict to $43 billion.
Turkey's weekly data fully documents this process: foreign exchange reserves, excluding gold, fell from $55 billion on March 6 to $47.8 billion on March 13—first using foreign exchange ammunition. By March 19, foreign exchange reserves rebounded to $53.6 billion, but gold reserves simultaneously dropped from $134.1 billion to $116.2 billion—indicating that foreign exchange ammunition was nearly exhausted, and gold was being mobilized. This sequence represents a textbook example of an emergency defense strategy: first using foreign exchange, then gold.
A key aspect of this operation is that more than half of Turkey's gold reduction was conducted through swaps rather than direct sales. Gold swaps essentially involve "exchanging gold for foreign currency with a commitment to repurchase." The central bank transfers gold to counterparties, typically primary dealers, in exchange for an equivalent amount of dollars, while signing a forward contract to repurchase the gold at a slightly higher price in the future. This is a short-term financing measure, not a permanent liquidation.
The central bank's preference for swaps over outright sales reflects at least three considerations. First, it preserves long-term holdings. If the oil price surge is judged to be temporary, swaps can address immediate needs while allowing for future gold repurchase, avoiding the destruction of a decade of accumulation. Second, it minimizes impact on gold prices. Directly selling 60 tons of gold could trigger a sharp market decline, devaluing the remaining $100+ billion in gold reserves. Swaps, conducted in over-the-counter markets, have a much smaller impact. Third, it provides political缓冲. Gold is viewed as an "inflation-resistant totem" by the Turkish public, and announcing large-scale sales could easily cause panic. Swaps allow for a degree of ambiguity.
The operation was completed swiftly within two weeks due to a key preparatory measure: Turkey holds approximately 111 tons of gold, worth about $30 billion, at the Bank of England. This gold can be used for foreign exchange intervention without logistical constraints—no need for cross-border physical transport, allowing for direct pledging and liquidation in the City of London.
Turkey has a historical pattern: selling gold during crises and buying back afterward. During the 2018 lira crisis, the 2020 pandemic shock, and the 2023 earthquake, the central bank reduced gold holdings to provide liquidity but resumed accumulation later. Analysts widely believe the March 2026 operation continues this pattern. However, this judgment hinges on a core premise: the war cannot be prolonged.
Swap agreements involve carrying costs and interest. If the war persists, energy prices remain anchored above $100 per barrel, and Turkey's foreign exchange earnings cannot cover the soaring energy bill, these "temporary swaps" may never be redeemed, effectively becoming "permanent fire sales." Therefore, if the conflict continues in the coming weeks, Turkey may need to further utilize its $135 billion in gold reserves as a lifeline.
Although Turkey prefers "pledging" gold to secure foreign exchange liquidity, these transactions still substantially increase downward pressure on the gold market. In London's over-the-counter market, when the Turkish central bank transfers tens of tons of gold as collateral to international counterparties, such as investment banks, in exchange for dollars, these financial institutions typically hedge their position risks by conducting corresponding short-selling or selling operations in spot or futures derivative markets. Consequently, the liquidity of this gold eventually transmits to the market, indirectly increasing supply and depressing prices.
In conclusion, Turkey's central bank shedding 60 tons of gold in two weeks is not an act of panic or speculation. It is a rational self-preservation measure by a country highly dependent on energy imports, facing triple blows of depleted foreign exchange, a plummeting lira, and a natural gas supply cutoff after its allies bombed its largest energy supplier.
As the war outlook worsens, Turkey must continue to withstand the pressure.