Turkey’s central bank has sharply reduced its gold holdings in a bid to stabilize the Turkish lira after the outbreak of the war in Iran, highlighting how geopolitical turmoil can quickly reshape monetary policy. In the two weeks following the start of the conflict, the Central Bank of the Republic of Turkey (CBRT) sold and swapped roughly 60 tons of gold worth more than $8 billion, adding to downward pressure on global bullion prices.
The move marks a significant policy shift for Turkey. For much of the past decade, the country has been one of the world’s most active official gold buyers, building reserves as a hedge against external shocks and a way to reduce dependence on dollar-denominated assets. Now, those same reserves are being used as a frontline tool in defending the lira.
Recent central bank data show a steep drop in Turkey’s gold reserves. Holdings fell by 6 tons in the week of March 13 and by another 52.4 tons in the week of March 20, representing one of the largest short-term drawdowns in recent years. According to people familiar with the matter, part of the gold was sold outright, while the majority was used in swap agreements to obtain foreign currency or lira liquidity.
Separate banking estimates indicate that the central bank sold about 22 tons of gold in one week alone and used another 31 tons in gold-backed lira and foreign-currency swaps. In total, the CBRT’s gold reserves reportedly fell by nearly 50 tons to 772 tons last week, marking the biggest weekly drop since August 2018.
The CBRT’s actions come amid heightened market stress after Israel and the United States attacked Iran on February 28. The fallout from the war increased volatility across regional markets, drove up Turkey’s energy import costs, and boosted domestic demand for dollars. These pressures made it more difficult for Turkish authorities to maintain the lira’s stability, a central pillar of their disinflation strategy.
Turkey has already spent heavily on conventional interventions. The central bank is estimated to have sold around $26 billion in foreign currency since the war began, in addition to the gold it has mobilized. Using gold reserves offers the bank another way to generate liquidity without relying solely on direct forex sales.
Central banks typically hold gold as a reserve asset for diversification, crisis protection, and collateral. In Turkey’s case, that gold is now being used more actively through outright sales, swap agreements, and market operations abroad. The central bank can sell gold for foreign currency to support the lira, use gold as collateral to obtain dollars or lira liquidity, or conduct gold-for-foreign-currency transactions in international markets such as London. This approach gives the bank flexibility. Outright sales provide immediate funds but permanently reduce reserve holdings. At the same time, swaps allow the bank to raise liquidity while still retaining a claim on the gold, even though those assets remain tied up. It is also common for central banks to sell spot gold and agree to repurchase it later, effectively using bullion as collateral for low-cost dollar financing.
Turkey’s intervention was large enough to affect the global gold market. Reports that the CBRT was discussing the use of gold reserves through London market transactions briefly pushed spot gold prices from gains into losses.
The size of Turkey’s activity also exceeded outflows from gold exchange-traded funds during the same period. Bloomberg data showed that gold ETFs saw outflows of about 43 tons over those two weeks, compared with Turkey’s estimated 60-ton gold mobilization. Gold prices have also been under broader pressure this month, falling around 15% as investors took profits after strong gains since last year. Bankers estimate that a roughly 10% weekly drop in gold prices reduced the value of Turkey’s gold reserves by nearly $8 billion. As a result, the value of gold within the central bank’s total reserves fell by around $18 billion in one week when accounting for swaps, sales, and price declines.
The decision to use gold in this way marks a clear break from Turkey’s long-running reserve strategy. Over the last decade, Ankara has steadily accumulated gold, becoming one of the world’s most significant official-sector buyers. The goal was to strengthen reserve credibility and reduce exposure to the U.S. dollar. According to World Gold Council data, Turkey held roughly 570 metric tons of gold as of early 2025, placing it among the top 15 gold-holding countries globally. More recent central bank data showed holdings at 772 tons before the latest sharp decline. However, differences in reserve figures may reflect varying accounting methods, including the treatment of domestically held commercial bank gold and swap positions. Now, instead of accumulating bullion, Turkey is using it as an active monetary policy instrument.
The central bank’s gold-based intervention has both advantages and risks. On the positive side, it gives policymakers another source of liquidity at a time when the lira is under intense pressure. It may also reassure markets that authorities are willing to use all available tools to prevent disorderly depreciation.
However, the strategy comes with costs. Selling gold reduces long-term reserve buffers, while large-scale use of swaps can complicate reserve management and transparency. Rating agencies and investors closely monitor reserve adequacy, especially in emerging markets with high external financing needs. Despite the gold-related losses, Turkey’s gross foreign-exchange reserves rose by $5.8 billion last week, suggesting that the operations did provide some immediate funding relief. Still, total reserves fell by $12.2 billion to $177.5 billion, underscoring the strain on the country’s overall reserve position.
Analysts say Turkey’s actions reflect the difficult choices facing central banks during periods of geopolitical and financial stress. Iris Cibre, founder of Istanbul-based Phoenix Consultancy, estimated total gold sales and swaps at 58.4 tons, with more than half of the transactions taking place overseas through gold-for-foreign-currency swaps. Daniel Ghali, a commodity strategist at TD Securities, said the war in Iran may reduce central bank gold demand in the short term and force some countries to sell reserves to meet dollar-denominated obligations. While outright gold sales are not expected to become the global norm, he said the broader trend of central banks steadily increasing gold holdings is likely to slow.
Turkey’s use of gold reserves to defend the lira marks a major shift in both domestic monetary policy and reserve management. Faced with the economic fallout of the Iran war, the central bank has moved beyond conventional foreign-exchange intervention and turned to one of its most valuable strategic assets.
The policy may provide short-term support for the lira and help ease liquidity strains, but it also reduces reserve buffers and exposes Turkey to new risks if market pressure persists. More broadly, the episode shows how even countries that spent years building gold stockpiles may be forced to deploy them when external shocks intensify. For now, Turkey is balancing immediate market stabilization against longer-term financial resilience. The outcome will depend not only on its own policy choices but also on the direction of the conflict, the strength of global gold prices, and confidence in the Turkish economy.