Gold Investment Remains a Staple Despite Economic Shifts
Gold continues to hold a significant place in Turkey’s investment landscape, with much of it stored “under the mattress” by individual investors. As a traditional investment instrument, interest in gold has surged in recent years, driven by economic uncertainties and its historical value as a safe haven.
In response to the growing demand, the Turkish government introduced a monthly import quota of 12 tonnes in August 2023. Although the rise in Turkish lira (TL) interest rates and the trend of reverse dollarization have recently tempered this demand, gold imports have begun to increase again, signaling a resurgence in investor interest.
Gold Quotas and Off-Record Trade
Reports suggest that the import quota has led to a shift in gold trade in Turkey, with some transactions moving off the books. This may partly explain the $18 billion outflow recorded under the “net errors and omissions” item in the balance of payments over the 12 months ending in November. To address this issue, the gold import quota is set to rise to 14 tonnes in February, as announced by Dünya Newspaper. This adjustment aims to encourage recorded imports and reduce unregistered trade.
Estimating Turkey’s Gold Stock
Turkey lacks official data on the total size of gold investments, but estimates can be drawn from foreign trade and domestic production data. By analyzing TurkStat’s monthly gold import/export figures, average gold prices, and domestic production data, the estimated domestic gold stock reached 4,119 tonnes (valued at $349 billion) by the end of 2024. This figure excludes unrecorded gold trade and pre-1984 gold stocks, suggesting the actual total is higher.
In 2024, Turkey’s gold stock increased by 176 tonnes, a decline from the 361-tonne growth in 2023. This slowing trend aligns with rising TL interest rates, which temporarily curbed interest in gold investments.
Rising ‘Under the Mattress’ Gold Stocks
Not all gold stock is unregistered. Precious metal accounts at Turkish banks surged to 667 tonnes in February 2021 due to government policies but fell to 495 tonnes by the end of 2024. Meanwhile, public sector reserves saw a slight decline, with the CBRT’s gold reserves decreasing by 15 tonnes to 542 tonnes, and the Treasury’s reserves increasing by 11 tonnes to 61 tonnes.
The unregistered gold stock—held privately by individuals—grew by 144 tonnes in 2024, reaching 3,021 tonnes. This equates to approximately $255 billion in unrecorded investment, underscoring the ongoing preference for physical gold storage.
Future Trends in Gold Investment
Although the pace of gold investment has slowed compared to previous years, informal gold investments have seen a recent uptick. With TL interest rates still appealing, the prospect of gradual rate cuts in the near future may further fuel gold investments.
This trend highlights the need for the Central Bank of the Republic of Turkey (CBRT) to monitor gold investment dynamics closely, especially as they intersect with broader economic factors such as ‘dollarization’ and monetary policy adjustments.
Source: dunya.com/Erkin Işık
Translation: Cem Cetinguc