Turkey Achieves Global Acceptance

Please read the full article as there is an interesting polling question toward the end.

The LBMA, the global authority on global bullion markets, recently published a report that has a spotlight on Turkey's Gold Market for 2021.

Read more:

Approximately a couple of months ago, the Central Bank of Turkey and the Ministry of Treasury & Finance implemented regulatory changes that are globally accepted. This prompted various other government authorities such as Borsa Istanbul to firmly ensure its members adhere to the same in terms of trade and compliance standards.

Some of the notable highlights are as follows;

  1. Only Borsa Istanbul members are eligible to import and clear gold imports. This means that the Turkish market is no longer a free market to import.

  2. Importing LBMA and Borsa Istanbul accepted good delivery bars does not require assaying by the State Mint. All other forms of non-accredited gold requires assay and clearance. Earlier LBMA and Borsa accredited refineries could perform this role but now all such non-accredited gold forms has to mandatorily assayed by the State Mint before import clearance.

  3. It has become a mandatory requirement for all Borsa Istanbul members to comply with an annual compliance audit, the standard of which is the same of the LBMA Responsible Gold Guidance. And the audit report submitted by an accredited auditor needs to be approved by a department of the Turkish Government.

What this means for Turkey's Gold Market Global Reputation?

Clearly, it puts Turkey on the world map in terms of establishing and implementing robust standards that are globally accepted. Not only does it enhance the reputation but provides confidence to international entities to secure gold related financing and trading facilities from leading financial institutions.

We expect the following positive outcomes:

  1. Reducing cash transactions systematically throughout the market

  2. Two separate markets to co-exist without dependence on each i.e. the souk like the Grand Bazaar and International Trading Entities

  3. Borsa Istanbul members to be able to secure credit lines for bullion trading

However, not all facets of the Turkish Gold Market have immediate benefits.

We are given to understand the following challenges:

  1. Financial Institutions: To import any form of gold, the market participant needs to obtain permission 3 days in advance from the relevant government authorities and it needs to state the quantity, value and gold form/acceptable LBMA gold bar brand. Not all institutions are geared up efficiently to request for this permission.

  2. Gold refineries are likely to reduce their gold dore imports as all non-accredited gold forms require assay and clearance from the State Mint. Whilst the State Mint operates at internationally accepted standards, there could be delays to obtain results and therefore increases the funding costs and turnaround time. These two factors are critical for imports and consignments.

  3. Jewellery manufactures are likely to have lower accessibility to Borsa Istanbul accredited good delivery brands as the refineries will need to focus more on sourcing jewellery scrap and mined gold from Turkey. This will promulgate an increase in demand for accessibility to LBMA accredited good delivery brands and therefore increase their cost of jewellery making charge due to the higher premiums of LBMA accredited bars.

At this point whilst we cannot quantify the impact of the new regulations, but one thing is for certain. The Turkey Gold Market is ready for international trade more than ever before. It remains to be seen how the market depth of participants in Turkey create an equilibrium to absorb the challenges and help the international entities to increase global business.

Polling Question:

In your opinion, and possibly by end of 2021, what do you feel about the new regulations that have an impact on the overall Turkey's Gold Market?

  1. Positive

  2. Negative

  3. No Idea

  4. Not Relevant