Are central banks selling gold?

Stories are circulating about central banks selling gold. These centre on Turkey, now Poland, and the Gulf nations. This report looks at the facts.

The easy one to dismiss is Poland. The head of its central bank reportedly said that Poland could take profits on some of its gold to finance anticipated defence expenditure. But those who read on would have noticed that he then said that the government has zero interest in doing so. So Poland is a non-event.

Turkey is a different matter but is a little more complex than headline numbers suggest. It should be noted that there is a healthy gold trade between the central bank and commercial banks with frequent leases and swaps between them.

The reason is that both commercial banks and their customers have had for a long time a significant interest in gold as a hedge from a chronically weak lira. Don’t forget that in 2005 the process began of creating the new lira at an exchange rate of a million for the old one. And that in the last 10 years, the new lira has declined further from under 2 to the dollar to 44.6 currently.

The gold trade has become a regulator of money supply. By swapping with or selling