Desperate to amass gold that can support its tumbling currency and provide stability to its fragile economy, Turkey has devised a plan to access the substantial holdings of its citizens. The Turkish Treasury will designate about 1,000 retail jewelers to collect gold from willing Turks for deposit at state banks who will then have the right to withdraw physical gold.
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Turks have substantial gold holdings, estimated at about 40 percent of the nation’s gross domestic product. The precious metal is deeply embedded in the country’s cultural heritage and plays a central role in the retail economy. Not only is gold a popular gift for weddings and religious events, but it is also relied upon for business transactions. In Istanbul’s Grand Bazaar, one of the world’s oldest markets and the center of Turkey’s jewelry business, retailers pay their rents in gold. To protect themselves from persistent double-digit inflation, resulting from the weak Lira, many Turkish homeowners have gold tucked under the mattress, a collective stash believed to be in the neighborhood of 5,000 tons.
For the past three years, Turkey’s central bank has been buying all the nation’s gold production, which is on track to hit a new high this year of 44 tons.
But the Turkish Lira has continued falling, as the nation’s foreign currency reserves have dwindled. Moreover, COVID-19 has severely damaged Turkey’s economy which is heavily reliant upon tourists, many of whom have cancelled visits due to the pandemic. As a result, both the Turkish government and its citizens are more reliant than ever in modern times upon gold as a store of value.
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