Turkish gold imports in February could be weak again – Metals Focus

Otmane El Rhazi from The Bullion Desk.

Turkish gold imports in February could be weak again following the lowest January total in six years, Metals Focus (MF) warned.

The country imported just 2.26 tonnes of metal in January, according to data from the Borsa Istanbul, a drop of more than 80 percent from 11.79 tonnes in December. Local gold prices peaked last month at 3,142.00 Turkish lira per ounce, close to near historic highs.

With prices in February only slightly lower at 3,028.20 Turkish lira, imports could remain low for a second consecutive month, the research firm said in a report.

The key driver of the drop in January’s figure was a surge in jewellery scrap supply in Turkey, it added. Domestic refiners were working at full capacity, causing local premiums to move to a discount over the price on international markets.

Simultaneously, investment demand was reportedly weaker, reflected in a sharp fall in January’s coin production at just 2.4 tonnes.

“This suggests that few retail investors in Turkey expect gold to see much upside from current levels. This is perhaps hardly surprising given that Turkish lira gold prices have rarely broken above this threshold,” MF said. “On the only other two occasions this has happened dollar gold traded at $1,900 and $1,770, in August 2011 and September 2012 respectively.”

“The lack of coin demand, combined with increased selling back of coins into the secondary market, saw Zynet (kilo) coin bags trade at a $30-50 per kilogram discount for 2015 dated coins,” it added.

There are expectations across Turkey that a further cut in interest rates is likely in the near term, which has pushed the lira above 2.5 against the dollar this for the first time in its history. The Turkish currency has lost around 80 percent of its value since 2013 after it was alleged that the country has been paying Iran in gold for gas and oil imports.

“This in turn should see Turkish lira gold prices remain elevated,” MF said. “Given the size of Turkey’s gold jewellery stocks, estimated at several thousand tonnes, the potential remains for domestic scrap supply to continue at a high level.”

“Although a portion of this is being exported, it also seems likely that Turkish banks will build up stocks of discounted 995 kilobars,” it added.

When gold priced in Turkish lira falls and investment and jewellery demand normalise, loco-Istanbul vaults will be emptied first before large imports resume, MF said

At an average of 181 tonnes per year over the past 10 years, Turkey is the fourth-largest consumer of gold, accounting for around six percent of global consumer demand, according to the World Gold Council. Still, total imports in 2014 sank to 130.9 tonnes, a drop of 57 percent from the 2013 total of 302.3 tonnes.

(Editing by Mark Shaw)

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