UPDATE 1-Turkish May trade gap falls 15.5%, exports jump

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* Iran is leading exports destination

* Trade deficit confirms gradual narrowing in c/a deficit (Adds details, background, quotes)

ISTANBUL, June 29 (Reuters) - Turkey's trade deficit fell 15.5 percent in May from a year earlier on the back of falling commodity prices and strong gold exports, data showed on Friday, indicating the central bank's measures to narrow the trade gap had been effective.

Turkey's May trade deficit stood at $8.58 billion, down from $10.164 billion a year earlier, the Turkish Statistics Institute said, above a forecast of $8.2 billion in a Reuters poll.

Exports rose 20.3 percent to $13.168 billion and imports increased 3.1 percent to $21.752 billion in May.

"Precious stones and metals exports continued to strongly contribute to monthly exports ($1.7 billion) on the back of bulk gold exports to Iran for payment purposes... Iran has become Turkey's main export destination over the past two months," wrote Basak Karaaslan, an economist at Finansbank.

Turkey gold exports jumped to $4 billion in the first five months of 2012 from $523.7 million from last year.

So far in 2012, Turkey gold exports to Iran reached $3.1 billion. Iran was the country where Turkey exported the most in 2012 and Turkish exports to Iran jumped 513.2 percent to $1.7 in May from a year earlier.

"Yet as headline exports are backed by precious metal exports one should not rely on its sustainability," wrote Faruk Gursel Kocak, research associate in Is Investment.

The trade deficit in the first five months of 2012 amounted to $35.6 billion, 18.9 percent lower than previous year.

"Looking ahead, a slowdown in domestic demand and fall in global energy prices will restrain the import bill in the coming months. Given today's figure is in line with the CBRT's (central bank) guidance on external adjustment... we do not expect it to have any impact on monetary policy," Basak Karaaslan added.

In the minutes of its policy meeting on June 21, the central bank reiterated it expects the current account deficit to decline gradually.

To fight inflation and a large current account deficit, the central bank has since late 2010 used a complex policy mix of daily liquidity injections, high reserve-requirement ratios and adjustments in its overnight borrowing and lending rates - the interest rate "corridor".

"We still think that the current account deficit to GDP (gross domestic product) ratio in Turkey will improve from 10 percent in end-2011 towards 8 percent by the end of this year," Ozgur Altug, chief economist at BGC Partners, said.

The share in total exports of Turkey's main trade partner, the European Union, dropped to 36.2 percent in May from 46.8 percent a year earlier.

"The continued increase in exports keeps its pace thanks to the government's diversification of the export market to markets other than euro zone...

"Iran has become Turkey's main export destination over the past two months," wrote Basak Karaaslan, an economist at Finansbank.Turkey gold exports jumped to $4 billion in the first five months of 2012 from $523.7 million from last year.So far in 2012, Turkey gold exports to Iran reached $3.1 billion"Rebalancing the trade balance as a result of trade market diversification and global growth concerns and falling global oil prices are affecting the current account deficit positively," said Erol Diler, Ata Invest. (Reporting by Seda Sezer; Writing by Seltem Iyigun)

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