Turkey woke up to the need to reform its economy and bullion markets in 1980, following a severe forex crisis, international debt, three-digit inflation and negative growth rates.

Liberalisation was not without hiccups though. The central bank scheme to import gold flopped without financial institutional (FI) support. Illegal imports increased the gold cost in the Turkish markets and forex requirements of gold traders exerted pressure on the forex prices in the parallel markets, increasing the spreads between the official and parallel rates.

To rectify these flaws, gold against the forex market was born in 1989. Transactions were carried out in foreign exchange. The FIs were allowed to sell gold to the public against the Turkish lira, with the retail price being market-determined.

This scheme was a resounding success as average gold consumption in the nineties more than doubled. Importantly, smuggling vanished almost totally. The gap between the international and domestic prices and in the buying and selling prices diminished. This made the jewellery sector competitive and increased the demand for gold as a short-term investment. Turkey became the world’s fifth largest manufacturer of gold jewellery, with 50% of the jewellery produced being exported.

The WGC formally opened its office in Istanbul, concentrating on technical aid, aid in design and advertising promotion.

The reform process then entered its final phase, with the setting up of a gold exchange, to enable forward trading and provide other gold-based derivatives to the people. Though in troubles, the exchange is soldiering on.