Turkey: Getting gold out from under Turkish mattresses

By Bahattin Gonultas

ANKARA

 Turks still favor a timeless investment strategy: Buy gold, and hide it somewhere safe, usually under the pillow or under the mattress.

“I don’t understand modern investments like stocks and forex. Gold is my family’s traditional investment as my mother always encouraged me to buy gold for savings,” says 36-year-old Selda Kirkpinar in Ankara, who stores away her gold at home.

Firdevs Karagoz, 28, a housewife from the eastern province Erzurum, said that she has bought more than 200 quarter gold coins since 2005 to save money. 

Turks are, in fact, the world's third-largest purchasers of the precious metal, after the Chinese and Indians. In 2013, the country’s gold imports skyrocketed 150 percent to reach a record level of 302.3 tons totaling $16 billion in value, according to central bank statistics.

Buying physical gold, that is, the actual metal as opposed to stocking shares in gold electronically, is seen as a traditional investment for many Turks, who are seeking security against the declining value of the Turkish lira. It is believed that over 5,000 tons of gold currently worth close to $200 billion, are held under the mattresses and pillows by Turkish residents as a form of personal savings, and therefore kept out of the banking system. Jewelry is also seen as a traditional gift for new babies and is given at wedding ceremonies in the country.

Turkey's Central Bank also held gold reserves totaling $20.13 billion as of Dec. 19 of this year. 

But the Turkish economy needs this money for investment as growth slows, and high interest rates make borrowing expensive. 

Can the government and the banks convince gold buyers to take their gold out from under the mattress and either sell it, or put it in the bank? 

Banks offer “Golden Days" 

The government has come up with a plan to persuade gold hoarders to do just that. 

Banks in the country have been hosting “golden days,” when customers bring in coins and jewelry to be evaluated by gold experts.

The practice is already helping to increase the level of household savings, which is the lowest among emerging markets at 12.7 percent compared with China’s nearly 50 percent, according to the World Bank.

Fatih Ozdogan, 48, a government worker, who received wedding gifts in gold worth 20,000 Turkish liras, said: "I am afraid to keep them at home," as a part of the gold was stolen from his house.  "Now I keep them in the bank," he said. 

"We had some gold from wedding gifts. We want to use it in an emergency. We used them for our investment in our family house. But we still buy gold for our children's future."

Ozdogan said that gold is less risky compared with the U.S. dollar and the stock exchange. "And also, it is easy to look after gold in small pieces. And, when you keep gold, spending is more difficult. That helps me to save," he said.  

But the Turkish government would like to see this gold get out of the house and into the bank. 

“If only 10 percent of these personal savings were put back into the Turkish economy, it would amount to a financial resource of around $20 billion, Ozcan Halac, the chairman of Istanbul Gold Refinery, said.

The process is starting. Gold deposits with banks rose to 205 tons worth 17 billion Turkish liras ($7.5 billion) in 2013, from only 34 tons worth 2.4 billion Turkish liras in 2010, Halac said.

The number of gold account holders increased to 2.2 million people at end of 2013 from 400,000 in 2010, according to Halac.

 "Gold hidden under mattresses by Turkish citizens is a great power and a secret weapon for our economy,” Halac added.  

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