Getting gold out from under Turkish mattresses

ANKARA - Anadolu Agency

DAILY NEWS Photo

Turks still favor a timeless investment strategy: Buy gold and hide it somewhere safe, usually under a 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 Kırpınar in Ankara, who stores away her gold at home.

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 a record level of 302.3 tons totaling $16 billion in value, according to central bank statistics.

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

Buying physical gold, that is purchasing 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 of Turkish residents as a form of personal savings, and therefore kept out of the banking system. In addition to gold, jewelry is seen as a traditional gift for newborn children and is also given at wedding ceremonies in the country.

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

However, 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 their mattresses 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,” where customers can 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, as compared with China’s nearly 50 percent, according to the World Bank. Fatih Özdogan, 48, a government worker, who received wedding gifts in gold worth some 20,000 liras, said: “I am afraid to keep it at home,” as a part of the gold was stolen from his house. 

“Now I keep it in the bank,” he said. “We had some gold from wedding gifts. We want to use it in an emergency. We used it to invest in our family house. But we still buy gold for our children’s future.”

Özdogan said gold is less risky when compared to the U.S. dollar and the stock exchange. “Also, it is easy to look after gold in small pieces. And, when you keep gold, spending is more difficult. That helps me 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, Özcan Halaç, the chairman of the Istanbul Gold Refinery, said.

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

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