Gold demand in Turkey could tick higher after the holy month of Ramadan – a time of self-discipline and self-restraint for Muslims – ends next week.
Domestic demand has been under pressure from double-digit unemployment, rocketing local gold prices and slowing growth in recent months.
Last month’s national elections have also failed to stimulate interest – the Turkish lira hit an all-time low shortly afterwards, sending the local gold price rocketing once again.
Still, the end of Ramadan on July 16 – followed by the three-day Şeker Bayramı festival in Turkey – may prompt some purchases of luxury items such as gold, one bullion dealer in Istanbul told FastMarkets.
“After the festival there will hopefully be more weddings and we might see a little bit more action in demand but even after the elections things have been quiet,” the dealer said.
Premiums in Istanbul have recovered from deep discounts towards the start of the year, although a 1kg .995 LBMA gold bar is still only at parity to the London spot price, with marginal 50-cent premiums emerging at times.
“Gold demand will improve after Ramadan but whether or not it is better compared to last year I am not sure, as the market is still very quiet,” Çağdaş Devrim Küçükemiroğlu of Metals Focus said. “The second quarter so far has not been good from a retail gold demand perspective and uncertainty remains following the elections.”
While much of Turkey’s supply comes from the scrap market, imports slumped by more than 90 percent year-on-year in June to 1.35 tonnes from 24.28 tonnes in the same period of last year, according to the Borsa Istanbul.
At an average of 181 tonnes per year over the past 10 years, Turkey accounts for around six percent of global consumer demand, according to the World Gold Council.
But a lack of movement in the international spot price – spot gold is down just 0.5 percent in July so far – is also placing even more weight on local demand.
But domestic gold prices have risen more than 25 percent since November to peaks of 3,294.10 lira per ounce, not far from all-time highs. Many consumers have therefore simply been priced out of the market while unemployment soars and the lira struggles – it was last at 2.68191 against the dollar, not far from the all-time lows of 2.79350.
Further instability may lie ahead, Küçükemiroğlu said – President Recep Erdogan is reportedly planning military intervention in Syria to counteract the Syrian Kurds’ advances against Islamic State on the Turkish border.
Erdogan recently vowed he would never allow an independent Kurdish state to be formed in northern Syria and is reportedly planning to establish a buffer zone along the border using military force.
“If the Turkish military does go into Syria as President Erdogan plans, that could put even more pressure on the Turkish lira, which will make gold more expensive again and could hurt demand,” Küçükemiroğlu said.
Turkey had been praised for the cheap credit pouring into the country from major economies and developing markets. But while GDP growth hit 12 percent at one stage, it has come under increased strain recently.
Its economic model, built largely on domestic demand and the construction sector, began to falter when the US Federal Reserve announced the end of its third quantitative easing programme last year.
Anticipating a stronger dollar, investors pulled money out of the emerging economies. In Turkey, GDP growth slowed to below three percent last year from nine percent in 2010 and 2011, while inflation of around eight percent is far above the government’s five-percent target.
Coalition talks are set to take place this week; if no solution is found within 45 days of the June 7 elections, Erdogan can call snap elections within another 45 days.
If his AK Party claims victory then, constitutional changes would bolster Erdogan’s power and threaten the central bank’s independence.
Erdogan claims that the current parliamentary system is ineffective and wants Turkey to move to a more presidential system of government similar to Russia.
(Editing by Mark Shaw)
The post End of Ramadan ‘could boost gold demand’ in Turkey appeared first on The Bullion Desk.
No comments:
Post a Comment