(Kitco News) – The value of all the gold kept in people’s homes in Turkey is at least $500 billion, according to Mustafa Atayık, president of the Istanbul Chamber of Jewelers (İKO).
In a recent article in the major Turkish daily Hurriyet, Atayık estimated that nearly 5,000 metric tons of gold are held in private homes in the country.
“If we consider the price of gold to be approximately $107,000 per kilogram, we can estimate that the value of this gold amounts to roughly $500 billion or more,” he said, cited “a lack of trust” in the currency and financial institutions as the reason why people continue to keep their savings at home.
Atayık is proposing the establishment of a ‘Gold Bank’ for private citizens. The specialized bank would be operated under the leadership of İKO as a public legal entity and would allow jewelers to become members in a cooperative structure, hold its capital in gold, receive support from the government, and standardize rules and practices that would help bring ‘under-the-mattress’ gold into the economy.
Atayık said less than half of the gold imported into Turkey is destined for the jewelry sector. “Only about 40 to 50 percent of the total imported gold is actually used by the industry,” he said.
He referenced data from the Gold Miners Association showing that as of 2023, Türkiye had 18 mining sites where feasibility studies and permit applications had been completed.
“Production reached 35.5 tons in 2023 and stood at 32.2 tons in 2024,” Atayık said. “The more we can increase domestic production and recycling of scrap gold, the more we can meet demand without relying on imports, thus avoiding foreign currency outflows and satisfying raw material needs locally.”
As Turkey has grappled with years of runaway currency devaluation and astronomical inflation, the country has seen record levels of gold smuggling.
“Turkey is witnessing a significant increase in gold smuggling, with security forces seizing about 350 kilograms of smuggled gold at border crossings so far this year,” wrote Mackenzie Crow in March 2024. “This figure already surpasses 60% of the total gold seized in the entirety of 2023. A notable incident involved the discovery of 88 kilograms of gold bars, valued over $6 million, hidden under the car seats in the eastern province of Van, near the Iranian border.”
The extreme demand for the precious metal has resulted in a price premium that is 7% above international spot prices, or $5,000 per kilogram, which Crow said is drawing in individuals looking to make a quick profit, as well as organized crime.
“The underlying cause of the smuggling surge is a significant premium on gold within Turkey, driven by a combination of high retail demand and a state-imposed cap on gold imports,” he said. While Turks, like the citizens of most countries, have always relied on gold as a stable store of value in times of economic instability, the current period of rapidly devaluing currency and ever-increasing price inflation has pushed gold demand far beyond anything the country has seen in recent history.
And the solution that President Recep Tayyip Erdogan has attempted to target the gold market with has become a big part of the problem.
“The government's quota system for bullion imports, aimed at narrowing the current account deficit, has further exacerbated the supply squeeze, pushing local premiums higher,” Crow wrote. “Despite these restrictions, demand remains strong, fueled by negative real interest rates, persistent inflation, and political uncertainty.”
To attempt to meet the soaring demand of its citizenry, Turkey’s mint has been working overtime to ramp up its regular production.
“The Turkish State Mint that has a monopoly on the production of standardized ‘Republic Gold’ coins is working double shifts through to 1 a.m. seven days a week to meet citizens’ demand,” said Mehmet Hekim, the Mint’s Deputy General Director. “It’s almost doubled its daily output in recent weeks to 700-800 kilograms as of Wednesday.”
But according to Mehmet Ali Yildirimturk, Vice-President of the Istanbul Jewelers, Goldsmiths, and Moneychangers Association, even this ramped-up domestic production can’t meet local demand.
“These days there are almost no sellers,” Yildirimturk told Crow. “When there’s lots of these small-scale buyers it creates demand and the price explodes.”
The issue is that this burgeoning demand cannot be satisfied when the government is also restricting importation.
“Turkey's gold imports have slumped for the fourth consecutive month due to government restrictions, despite domestic demand soaring, as reflected in the disparity between local and international gold prices,” the article noted. “The ongoing monetary policy tightening and the state-imposed quota on gold imports are attempts to stabilize the economy, but they also highlight the challenges of managing demand for gold as a traditional safe-haven asset.”
