Turkish gold imports hit highest on record in 2013
* Turkish gold imports surge to 271 T in year to November
* Further growth linked to gold trade with Iran
* Lower prices spur buying of jewellery, coins, bars
By Jan Harvey and Humeyra Pamuk
LONDON/ANKARA, Dec 5 (Reuters) - Turkey's gold imports have surged to their highest on record so far this year after a hefty drop in bullion prices, with further progress signposted if restrictions on trade with Iran are formally eased.
Turkey imported 270.7 tonnes of gold in the first 11 months of the year, data from Borsa Istanbul showed, more than double 2012's full-year imports of 120.8 tonnes.
The rise stemmed chiefly from this year's sharp drop in gold prices, which have fallen 26 percent since December 2012 after 12 straight years of gains.
"Turkey, like most of the price-sensitive markets, saw this year's lower price level as an opportunity to replenish stocks and release some of the pent-up demand that has been building as consumers have been priced out of the market," Cameron Alexander, an analyst with Thomson Reuters GFMS, said.
"Official coin demand has more than doubled, investment demand has also more than doubled, and jewellery demand has rebounded by around a fifth this year."
As well as the price outlook, further growth in imports next year will depend in part on how far Iranian demand for gold from Turkey picks up, Alexander said, after the trade tailed off this year due to U.S. sanctions.
Iran could obtain access to $1.5 billion in revenue from trade in gold and precious metals under the terms of an interim deal agreed last month in Geneva between Iran and six world powers.
Turkey's gold trade with Iran boomed in 2012 when Ankara was paying for its natural gas and oil imports with Turkish lira, and Iranians were using those deposits held in Turkey's Halkbank to buy gold.
"Given the sanctions on metal trading have been lifted, we may see a return of this trade," Alexander said. "This would in turn drive imports again to meet the gas-for-gold transactions. I have no evidence at this point that there has been any increase in trade, but we are watching closely."
Turkey's gold imports dropped sharply after the global financial crisis pushed gold prices sharply higher from 2008 onwards. In 2009, when prices climbed 25 percent, shipments slumped to 37.6 tonnes from 165.9 tonnes a year earlier.
Borsa Istanbul does not produce gold export data, but a separate report showed that on a U.S. dollar basis, exports of precious metals and stones were less than half 2012 levels in the first 10 months of the year, according to Mitsui Precious Metals analyst David Jollie.
That suggests the rise in demand was local, he said.
"You've had quite a long period now of a relatively weak economy in Turkey, and high gold prices," he said. "Now we're at a point where gold is cheaper and the economy is showing signs of growth, so it's natural that people want to buy gold."
Gold is a traditional investment for many Turkish people seeking to hedge against sharp fluctuations in their currency. Jewellery, such as women's gold bangles gifted at weddings, is seen by many as a safe store of wealth.
Figures from the World Gold Council and Thomson Reuters GFMS suggest that Turkish consumer demand for jewellery, coins and bars rose by a third year-on-year in the second and third quarters combined.
Around half of Turkey's gold imports so far this year were made in the second quarter, when the gold price posted its sharpest drop, from around $1,600 an ounce to $1,230 an ounce.
"Because of this significant fall in prices, we saw gold imports rising a lot in April to June," Gokhan Aksu, deputy general manager of Istanbul Gold Refinery, said.
"It was both reactionary buying from the producers and also those who wanted to take advantage of the arbitrage. There were times when it made more economical sense to import."
Turkey's official-sector gold reserves have also risen by more than 130 tonnes this year. This does not reflect central bank acquisitions, but is a result of the Turkish authorities' acceptance of gold on deposit as part of commercial banks' reserve requirements.
"Turkey is a trailblazer when it comes to the role of gold within the financial system," Natixis analyst Nic Brown said. "The authorities have allowed banks to use gold as part of their reserves, which has initially resulted in gold being mobilised from within the country.
"That has injected a significant amount of liquidity into the system. The banks have been able to use gold that had not been doing anything economically useful to become part of their reserves, and to boost their own liquidity."