• 747 days Will The ECB Continue To Hike Rates?
  • 748 days Forbes: Aramco Remains Largest Company In The Middle East
  • 749 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,149 days Could Crypto Overtake Traditional Investment?
  • 1,154 days Americans Still Quitting Jobs At Record Pace
  • 1,156 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,159 days Is The Dollar Too Strong?
  • 1,159 days Big Tech Disappoints Investors on Earnings Calls
  • 1,160 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,162 days China Is Quietly Trying To Distance Itself From Russia
  • 1,162 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,166 days Crypto Investors Won Big In 2021
  • 1,166 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,167 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,169 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,170 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,173 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,174 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,174 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,176 days Are NFTs About To Take Over Gaming?
Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

  1. Home
  2. Markets
  3. Other

Taper Trouble Hits Gold's No.4 Biggest Buyer

Turkey's imports of gold already doubled in 2013. Buying ahead of trouble is now looking smart...

After hiking interest rates from below 8% to a massive 12% on Tuesday night, Turkey's central bank has failed to rewind very much of this month's drop in its lira.

In fact, a sharp recovery from Monday's new all-time lows versus the dollar came before the Central Bank of the Republic of Turkey made that announcement. The lira has lost half that rally since. And now, after the US Fed went and tapered its flood of dollars a little bit further, an official from the CBRT apparently told Reuters this morning that "We are not working on capital controls and it is not on the table."

Gulp! Lots of analysts have already linked gold's 6% rally to emerging markets' fallout from Fed tapering this month. So what might Turkey's new "reassurance" do to its domestic precious metals demand?

Trumping even the all-conquering US dollar for emotional security, gold and silver remain the stand-out choice for savers fearing currency crises. And already last year, Turkey's imports of both precious metals leapt. Gold inflows to the world's fourth largest consumer doubled, hitting the greatest volume since at least 1995 according to the Istanbul Gold Exchange. Silver imports rose 60% to the greatest since at least 1999.

Now, how much the Taksim Square protests and government's violent response had to do with Turkey's surge in bullion and jewellery demand, no analysts we know have guessed so far this week. The world's heaviest gold coin producer, Turkey also doubled its coin output in 2013. A good portion no doubt went to meet foreign demand (just as the rise in gold imports fed growing gold exports to Iran.) But the plain growth in Turkey's domestic demand might either reflect last year's doubling of economic growth to 4% and above. Or it signalled fears of unrest and instability ahead.

If the latter, those fears sadly now look all too well founded. Gold priced in Turkish lira has risen 11% so far in 2014 already. But simply buying gold to keep at home might do only half the job.

Capital controls are where government slams the door on outflows of cash, trying to protect the home currency by barring people from selling it for other currencies or assets, especially overseas.

Such controls still constrain people across emerging Asia. (You can't move money out of India without approval from the Reserve Bank. Good luck with that!) All too often, controls on gold...the ultimate escape from currency collapse...also apply. (Again, see India for a live example.) And it was only three decades ago that such controls on rich-world households in Western Europe and North America began to be dismantled. The Banca d'Italia held a monopoly on trading investment gold bullion in Italy until 1999.

Owning physical bullion overseas, in advance of such trouble, offers a long-proven, deeply liquid escape. Most BullionVault users, almost 90% of whom live in the US, UK or Eurozone, choose Zurich for gold, but Singapore gold storage is increasingly popular too.

The 2014 risks to emerging-market gold demand, meantime, could go either way. Higher interest rates and lower growth would dent jewellery buying. Further currency and stockmarket turmoil would likely increase wealthier middle-class bar and coin hoarding.

Ben Bernanke's legacy of taper trouble, in short, could go either way for global gold and silver investment. That's before the $2.5 trillion of frozen money now held in bonds by the Fed starts to mature and melt into all too-spendable, inflationary cash.

 

Back to homepage

Leave a comment

Leave a comment