Turkish officials look for measures to ease markets

ISTANBUL - Hürriyet Daily News

If people deposit gold into banks, the country’s risk perception will improve, Deputy PM Ali Babacan says. DHA photo

Turkish officials have declared new measures to minimize the negative effects of the latest fluctuations in the markets from a series of foreign exchange sale tenders to new stimuli for a gold rush, but it is questionable whether they will help.

If the people deposit their gold in banks instead of keeping it in their homes, Turkey’s reserves’ real value will appear up and the country’s risk perception from abroad will ease, Turkish Deputy Prime Minister Ali Babacan said June 20, during the fourth Istanbul Gold Summit.

However, sector professionals note that “gold banking” will lead a monetary expansion.

“The code enabling banks to trade gold came into force in 2006, but it was almost inactive since last year. When the Central Bank started to accept gold for reserve requirements, banks began to move into gold banking,” Mehmet Ali Yıldırım, the finance analyst of Anatolia news agency, said in a telephone interview with the Hürriyet Daily News on June 21.

Yıldırım added that there was a call for the people to put the gold they keep at home into the economy, as Babacan had said. “The investors deposit gold at banks. Then, the banks deposit this gold in the Central Bank as reserve requirements and withdraw their cash, which is deposited there with a 0 percent interest rate. As the banks can use this noninterest money, a monetary expansion is provided,” he said.

Turkish markets at risk

Gold banking aims to bring gold kept at home into the economy in order to create a financial resource and reduce the current account deficit and gold imports, which is 200 tons annually.

After the latest announcement of the U.S. Federal Reserve, the signs of less global stimulus sink stocks, bonds and currencies from India to Brazil and Turkey. As gold prices are dependent on dollar-lira parity, the dollar hit a record and the gold price per gram approximately dropped.

More than $20 billion left funds investing in developing-nation assets in the three weeks to June 12, the most since 2011, according to finance sources. Brazil, Turkey and Malaysia unfortunately have the highest funding risk as they have larger borrowing needs.

The dollar broke new records on the afternoon of June 21, climbing to 1.9460 Turkish Liras although Turkey’s Central Bank had opened $50 million – worth exchange sale tenders on June 20-21, and then Gov. Erdem Başçı had announced it may resume funding markets through daily repo auctions at its policy rate from June 24 if global market conditions continue to calm down.