In a new move aimed at addressing rising gold imports due to strong demand, Turkey called on local lenders to set minimum spreads on domestic gold sales, Bloomberg reported.

The minimum spread indicated here is the difference between the ask price and the bid price. The Turkish Central Bank asked lenders to set it at least 3%. Bloomberg quoted informed sources as saying that this will only affect gold sales in pounds.

Prior to this, spreads were set by lenders independently of the central bank. Turkey’s central bank declined to comment.

Turkey saw a surge in demand for gold last year, as investors turned to the precious metal as a hedge against inflation, currency depreciation, and general uncertainty.

Gold imports accounted for $20.4 billion in 2022, which severely affected the current account balance. The current account gap in 2022 reached $48.8 billion for the full year — the largest gap since mid-2018, according to data published Monday.

“This was due to higher energy bills, what gold imports caused was a large deficit and an increase in basic imports (excluding gold and energy) amid demand management policies,” said Mehmet Morjan, chief economist at ING in Turkey.

In January, Turkey imported $5.1 billion worth of gold, according to Turkish Trade Minister Mehmet Mus.

Retail consumers were not the only ones who stepped up their purchases of gold last year. Turkey’s central bank was also the largest official buyer of gold in 2022. Turkey’s official gold reserves rose by 148 tons and reached 542 tons, hitting an all-time high in 2022, according to World Gold Council data.

In the fall, inflation in Turkey accelerated to 85% before slowing to 64% in December. The Central Bank of Turkey was also one of the few banks to cut interest rates in 2022, lowering the base rate from 14% to 9%.

Earlier this week, Turkey also decided to suspend some gold imports, according to another report from Bloomberg. This was aimed at protecting the economy after the devastating earthquakes that hit the country in the past week. The importance of imposing this ban on imports remains to be made clear.

The issue of rising gold imports is so important that the country’s President Recep Tayyip Erdogan touched on it two weeks ago, when he said that Turkey plans to continue increasing its gold production so that it can reduce its imports of the precious metal.