ISTANBUL: Gold demand from Turkey is set to fall this year, with consumers likely to delay purchases ahead of a key election while war in Iraq and a weak Russian economy could limit jewellery exports, industry officials said on Wednesday.
Turkey, the fourth-largest consumer of gold according to the World Gold Council (WGC), saw bullion imports more than halve to 131 tonnes last year from a record 302 tonnes in 2013, when they were boosted to help meet demand in neighbouring Iran and the spot gold price hit multi-year lows.
The halt in Iranian demand after Western sanctions, and a weaker lira making gold more expensive for local consumers, led to the fall last year. In 2015, a bullish outlook for the US dollar and a parliamentary election scheduled in June are likely to put off gold purchases in Turkey.
"Even though the gold price is falling globally, the lira has to strengthen against the dollar to make it attractive for domestic consumers and so far that has not been the case," said Gokhan Aksu, general manager at gold traders AG Altin. Emerging market assets are likely to come under pressure this year as the US Federal Reserve moves closer to raising interest rates.
Turkey has been particularly vulnerable to US rate hikes which would draw money flows away from its assets and increase the cost of financing its external deficit. The lira lost nearly 8 percent last year.
The level of support the ruling AK Party garners under Prime Minister Ahmet Davutoglu in the parliamentary election will be key for President Tayyip Erdogan's ambitions to change the constitution and bolster the powers of the presidency, a move opponents fear will herald increasingly authoritarian rule.
Aksu predicted gold imports would fall further in 2015 to around 120 tonnes.
He said the production of gold coins, a traditional gift and safe store of wealth for many Turks, was also expected to stay flat at around 40-45 tonnes.
Prospects for jewellery exports are also uncertain, with top export destinations Iraq, Russia and the Gulf grappling with problems including falling oil prices, weak economies and war.
"We will consider ourselves lucky if we can increase the exports by 10 percent," said Ali Bulut, CEO of Altinbas Holding, one of the top two jewellery producers in Turkey.
Turkey increased gold jewellery exports to $2.9-$3 billion last year from $2 billion in 2013, according to the exporters' association.
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