Photographer: Akos Stiller/Bloomberg

Turks Seek Gold More Than Liras in Response to Erdogan’s Call

  • Nation’s residents sold net $451m after campaign to boost lira
  • Locals also increased precious metal holdings by $700 million

Asked by their President Recep Tayyip Erdogan to shun the dollar, Turks are favoring gold over liras.

On the face of it, the appeal to defend the Turkish currency worked. It arrested the biggest three-week surge in foreign-currency deposits since August as Turks drew down a net $450 million from these accounts in the week ended Dec. 9. But residents also boosted their precious metal holdings, traditionally denominated in dollars, by $700 million, a hint that confidence in their currency remains tenuous, according to Nomura Inc.

The data is the first glimpse into the response to the president’s call to embrace Turkey’s national tender or gold as a means of fighting back against what he describes as the “economic sabotage.” The lira plunged to a record low this month and has dropped 14 percent this quarter, more than any other currency in emerging markets.

The greater change in gold holdings shows “deposit holders seemed to be on the defensive side against the prospect of further lira depreciation,” Inan Demir a London-based economist at Nomura, said by e-mail.

The lira strengthened 1.3 percent against the dollar in the week ended Dec. 9. That was the biggest jump since August, and pushed the currency further away from a record 3.5935 reached on Dec. 2. However, those gains stalled this week, with the lira sliding about 0.7 percent.

Turkish residents own $144 billion of foreign currency deposits and what they do with that fire-power can compound or smooth out the currency’s moves, depending on what side of the trade they take. Last week’s decrease in holdings, the smallest since April, pales in comparison to the $8.7 billion locals sold in the week after July’s failed coup or the almost $6 billion dumped in the three weeks that followed a rating downgrade by Moody’s.

The included sales from institutions like Borsa Istanbul, the national postal service and defense under-secretariat, who said they’d all gotten rid of dollars and euros to buy liras after Erdogan’s calls.

This week’s decline in currency reserves was “small enough to be mostly explained by cross exchange rate movements,” and selling by state or quasi-state institutions, Nomura’s Demir said. “The broader deposit holders were more reluctant to sell.”

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