Ankara spent years building a wall of gold and foreign assets against the next crisis. Then the Iran War arrived. Within weeks, billions of dollars and more than 100 tonnes of gold were mobilised to defend the lira. The question is no longer why Turkey saved so much. It is how long it can afford to keep spending it.
Turkey spent years buying gold in anticipation of the crisis everyone knew would eventually come. When that crisis arrived, Ankara did not send the gold anywhere. It sold it. In one week in March, Turkey’s central bank recorded its largest fall in gold reserves in almost eight years, with nearly 50 tonnes removed from its holdings.
The move came after the bank had already spent billions of dollars in foreign currency to slow the lira’s fall. What had been built as a financial shield was suddenly being used as one.
The timing was not accidental. The war with Iran sent new pressure through global energy markets and hit Turkey in one of the most sensitive parts of its economy. Turkey imports most of the energy it consumes. When oil and gas become more expensive, Turkish companies need more foreign currency to pay for them. More dollars leave the country, pressure on the lira increases and imported goods become more expensive. For an economy already struggling with inflation, the chain reaction can move quickly.
The Central Bank of the Republic of Turkey had little interest in waiting to see how bad the damage could become. It intervened. Around $26 billion in foreign currency was used to support the lira, according to market estimates reported by Reuters. Gold worth billions of dollars was also sold. Within weeks, Turkey had mobilised assets that had taken years to accumulate.
This is where the story becomes bigger than another difficult month for the Turkish currency. Ankara’s gold strategy had often been described as part of a wider attempt to reduce dependence on the US dollar. Turkey was among a growing number of countries that increased gold holdings as relations with Washington became less predictable and sanctions became a more common tool of foreign policy. Gold offered something foreign currency could not. It was a reserve asset that did not depend on another government’s promise.
But gold was also insurance. Turkey has now shown what that insurance was really for.
The scale of the intervention was striking. By early April, central bank sales and swaps had reduced Turkey’s total reserves by tens of billions of dollars. Gold holdings fell sharply in a matter of weeks. At almost the same time, US Treasury data showed a steep fall in securities attributed to Turkey, from $15.72 billion in February to $1.78 billion at the end of March.
At first glance, the numbers appeared to support the popular argument that Turkey was accelerating its move away from the dollar. The reality may be less dramatic but more important. Ankara needed cash. US government bonds are among the easiest financial assets in the world to sell. Gold can also be quickly converted into foreign currency. Turkey was not making an ideological statement. It was reaching for the assets it could use immediately.
That tells us something about the pressure on the Turkish economy. The lira is no longer simply a problem for economists and central bankers. It has become a national political issue. Years of inflation have changed how Turkish families save money. Many keep dollars, euros or gold because they do not trust the lira to hold its value. Businesses follow exchange rates because imported fuel, equipment and raw materials become more expensive with every fall in the currency.
A sharp decline in the lira can therefore reach Turkish households very quickly. Food prices rise. Fuel becomes more expensive. Companies face higher costs. The government then faces the political consequences. Allowing the currency to simply find its own level is not an easy option for Ankara, especially when inflation remains high.
The Iran war exposed this weakness without Turkey firing a single shot. Turkish cities were not attacked. Its ports remained open, and its factories continued to work. Yet fighting elsewhere in the region was enough to push energy prices higher, weaken confidence in the lira and force the central bank to use part of its financial reserves.
That may be the most important lesson from the crisis. Turkey has built a large economy and a powerful military, but it remains highly exposed to shocks in the regions around it. A war in the Gulf can become a currency problem in Istanbul within days. A rise in oil prices can reach Turkish families through supermarket shelves and fuel stations. Geopolitics does not need to cross Turkey’s borders to hurt the country.
For now, the central bank still has tools. Turkey has not run out of gold, and it retains substantial financial assets. The intervention also showed that Ankara is willing to act aggressively when the lira comes under pressure. But reserves are different from interest rates or political promises. Once spent, they must be rebuilt.
That is why markets are now watching Turkey’s remaining buffers so closely. The question is not whether the central bank can defend the lira during one crisis. It has already shown that it can spend heavily to do so. The real question is what happens if the next shock comes before those reserves are rebuilt.
Turkey bought gold because the world was becoming more dangerous. The danger arrived sooner than expected.
Now, Ankara is discovering the uncomfortable truth about financial shields. They work. But every time they are used, they become a little thinner.
