Turkey and Russia Highlight Gold’s Role as a Strategically Important Asset

Wednesday, April 25, 2018
By Paul Martin

By: Ronan Manly
GoldSeek.com
Wednesday, 25 April 2018

On 17 April, Turkish news publication Ahval published a report stating that during 2017, Turkey withdrew 26.8 tonnes of gold that it had stored in the vaults of the New York Federal Reserve, and moved this gold under the custodianship of the Bank of England and the Bank for International Settlements (BIS).

The source of the Ahval report was a Turkish language article from the popular Hürriyet newspaper in Turkey. According to the Hürriyet report, also dated 17 April, which reported on the latest annual report of the Turkish Central Bank (Türkiye Cumhuriyet Merkez Bankası), Turkey’s central bank increased its gold holdings by 83.3 tonnes during 2017, 37.7 tonnes of which it purchased in the gold trading market of Borsa Istanbul, Turkey’s securities and precious metals exchange.

But of most interest, according to Hürriyet, was that the Turkish central bank also withdrew 28.6 tonnes of gold from the New York Federal Reserve in what it called a ‘complete reset‘, implying that this 28.6 tonnes of gold was the total gold holding that the Turkish central bank stored with the New York Fed at that time. The gold withdrawn from the Fed was then placed with the Bank of England and the BIS. Hürriyet portrays this gold movement as a ‘diplomatic crisis‘ between Turkey and the US, connected to potential military operations by the US against Syria.

Whether the withdrawal of the Turkish gold was in the form of gold location swaps between the NY Fed and the BIS and Bank of England, or whether the gold was actually withdrawn and shipped to Europe was not mentioned. NY Fed gold holdings did not materially change at all during 2018, so it appears that the withdrawal was in the form of gold swaps between the NY Fed, Bank of England and BIS.

Additionally, most gold held at the NY Fed is in the form of US Assay Office gold bars that are no longer accepted as ‘Good Delivery’ gold bars on the international market, so if the withdrawal was a physical one, the gold bars would need to be sent to a gold refinery while in transit to be converted into modern ‘Good Delivery’ bars before being deposited with the Bank of England and BIS. An inconvenience most nation-state gold holders would want to avoid.

The BIS does not have its own golds storage facilities, but instead uses the storage facilities of the Bank of England in London, the Swiss National Bank in Berne, and indeed the New York Fed, maintaining gold accounts at each of these three locations which it describes as “loco London, Berne and New York“.

Turkish gold reserves as reported by its central bank are unusual in that the reported figure of 591 tonnes includes gold which Turkish commercial banks hold with the central bank as part of their gold required reserves. Stripping these commercial bank gold holdings out, the Turkish Central Bank held 202 tonnes of gold of its own at the end of 2017, up from 116 tons held in May of 2017, an increase of 86 tonnes during 2017.

With Turkey’s complete withdrawal of its gold from the gold vaults of the Federal Reserve Bank of New York (FRBNY) under the FRBNY’s headquarters at 33 Liberty in Manhattan, the question must be asked how many other central banks that perceive the United States as a threat have done likewise or are considering doing likewise. The 2008 version of the NY Fed’s brochure ‘Key to the Gold Vault‘ stated that the Fed’s vaults under its headquarters in Manhattan stored gold on behalf of 36 central banks.

The Rest…HERE

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