The Turkish gold market was in a confident mood this week, despite seeing demand fall to record lows in the first half of 2016, as dealers and traders look ahead to the summer buying season and participants remain bullish about the industry.
"It has been a very difficult year, and footfall has been increasingly down since January," a physical dealer at the centuries-old Grand Bazaar in Istanbul said.
"But we are all very confident the summer will bring the people in -- as it always has."
The differential paid to the international spot price was heard at a discount for many weeks this year, very rare in Turkey, but has recently returned to a $0.50-$1.00/oz premium.
According to Borsa Istanbul, traded gold volumes are at their lowest level since 1995, with less than 90 mt expected this year from 255 mt in 2015 and 241 mt in 2014.
In 2013, its biggest year, the exchange saw volumes of nearly 450 mt.
All gold and silver imports have to be registered at the exchange within three days of entering Turkey, so it is a fair barometer of the country's demand, which also includes less than 100 mt/year of mined gold.
Yet volumes are starting to return, with gold imports in April almost doubling to 3.2 mt from 1.7 mt in March, according to the most recent data from Borsa Istanbul.
"The summer is the most important time of the year, but the entire country has struggled with not only high gold prices but fewer visitors," a broker registered on the exchange said.
Turkey's tourist industry has seen a marked downfall in visitor numbers in 2016 because of terrorism fears, and the gold industry partly relies on foreign jewelery buyers, according to local sources.
Turkey is the world's largest exporter of gold jewelery outside of continental Europe and the US, and is the world's fourth-largest importer.
As well as visitors, the summer also sees a huge pick-up in domestic demand from the country's wedding season.
"Whatever happens, Turks will always buy gold as presents for births, marriages and even deaths, no matter the price," a dealer said this week.
Gold this year has recorded one of the strongest bull runs in recent times, up around 20% since the start of January at around $1,225/oz at 1200 GMT Thursday.
Spot prices hit 15-month highs around $1,300/oz at the beginning of May, but have fallen back in recent weeks on expectations of interest rate hikes.
High prices this year have hurt demand in many countries besides Turkey.
The World Gold Council recently said India in the first quarter had seen the lowest quarter of jewelery demand in fives years, while consumer demand in China also struggled.
Yet unlike the Indian gold industry, which has faced constant changes in tax and regular interference from lawmakers in recent years, dealers in Turkey are confident their priorities are are aligned with those of the government.
"The government knows how important the industry is not just to the sellers but also buyers, manufacturers and tourists," a local broker said.
"Many many people rely on the industry and it is very important to many Turkish people living here and abroad."
Jewelers benefit from the absence of VAT on gold and silver jewelery, while import taxes are below 5%.
India's jewelers recently ended a 42-day strike over a proposed 1% sales tax, on top of a 10% import duty already levied.
Talking to the dealers at the Grand Bazaar, which some say trades more volume than the official exchange and appears to operate more in decades than years, the industry clearly still has a long way to run, whatever the current climate.
