Turkey's trade deficit narrowed more than expected in June mainly due to gold exports to Iran, a dip in oil prices and a slowdown in the economy, data showed on Tuesday, indicating an improvement in the country's troublesome current account gap.

The trade deficit fell to $7.18 billion in June from $10.26 billion a year earlier, the Turkish Statistics Institute said, lower than a forecast deficit of $8 billion in a Reuters poll.

Turkish gold exports to Iran stood at $1.3 billion in June, bringing the total gold export so far in 2012 to $4.4 billion.

The Turkish Statistics Institute said there were no findings suggesting gold exports to Iran w ere u sed as a tool for oil and gas payments, rejecting media sp eculation t o that effect.

M ost of the gold export payments were made in cash , it said .

Turkey, which imported around 200,000 barrels a day of Iranian crude in 2011, sharply reduced shipments earlier this year to win a waiver from U.S. sanctions that allows it to continue purchasing Iranian crude through the second half of 2012. Turkey also imports gas from Iran.

"Improvement in the foreign trade deficit continued in June thanks to gold exports to Iran, declining petroleum price and a slowdown in the economy," said Ozgur Altug, chief economist at BGC Partners.

Previously, gold sector officials said Iranians were turning to gold for savings and possibly trade as Western sanctions tighten to force Iran to curb its nuclear programme.

Iran was the biggest single destination for Turkish exports in June. Turkish exports to Iran increased 471.2 percent to $1.6 billion from a year earlier.

Turkey's total June exports rose 16.9 percent to $13.27 billion and imports decreased 5.4 percent to $20.44 billion.

"When we look at the data excluding gold, we see that the annual increase in exports stands at 4 percent while the annual decline in imports rises to 10 percent," said Gizem Oztok Altinsac, an economist at Garanti Securities.

"The data shows a small current account deficit in June at around $3.7 billion and the annual current account deficit would narrow to $63-64 billion," Altinsac said.

Turkey's trade deficit in the first half of the year narrowed 21 percent to $42.79 billion.

Turkey's current account deficit, a major weak point in the economy, stood at $27.05 billion in the first five months of the year, 27 percent lower than the same period a year ago.

To fight against a widening external deficit and inflation, 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".

The share in total exports of Turkey's main trade partner, the European Union, dropped to 37.1 percent in June from 48.2 percent a year earlier.