TCMB Drops Regulation on Physical Gold in Financial System

The Central Bank of the Republic of Turkey (TCMB) announced on 2024‑05‑15 that it will repeal the regulation allowing the integration of physical gold assets into the financial system. This decision is poised to reshape the liquidity structure of the gold market, the bank’s reserve management, and the risk profile of the national financial system.

Roots of the Shift: 2022‑2023 Gold Policy

■Between 2022 and 2023, TCMB facilitated the systematic inclusion of physical gold into banks and financial institutions, boosting reserves by $1.2 billion.

■The strategy aimed to hedge against USD fluctuations and diversify foreign‑exchange reserves, culminating in a $1.5 billion gold‑reserve classification by Q3 2023.

Redistribution of Liquidity

■A decline in physical gold demand could trigger a $500 million liquidity outflow in the banking sector.

■Removing the framework raises the risk of a 0.4 % reduction in foreign‑exchange reserve management.

Strategic Implications for the Financial System

■Gold‑collateralised loans in the credit market are projected to shrink by 20 %.

■Investors may need to reassess 15 % of gold‑heavy portfolio strategies.

Market Reaction and Future Scenarios

■Borsa Istanbul gold funds exhibit 12 % lower volatility compared to large‑cap stocks like AAPL.

■Global investors forecast that gold prices might rebound to $1,800 USD by 2025.

Fatih Kılıç: TCMB’s move marks a pivotal moment in Turkey’s foreign‑exchange reserve strategy. While short‑term liquidity pressures may arise, the long‑term flexibility of reserve management is likely to improve. Investors will need to rebalance portfolios to mitigate volatility in gold prices.