Turkey discretely adds 577 metric tons of gold to its financial system, reveals Finance Minister
In Turkey, a significant portion of the population holds gold as a traditional and reliable store of value, primarily to protect against the Turkish Lira's frequent and severe depreciation. This cultural preference is driven by economic instability, currency depreciation, and inflation.
Over the past several years, the Turkish Lira has significantly depreciated, losing substantial value against the U.S. dollar. This economic instability, coupled with the perceived stability of gold, has incentivized holding gold as a hedge.
To address this situation, the Turkish government and central bank have implemented measures to channel these vast gold holdings into the formal financial system. The Central Bank of Turkey has been accumulating gold reserves aggressively as part of a broader monetary strategy to boost official holdings and back currency stability.
Authorities have also promoted gold-backed financial instruments and programs, encouraging citizens to deposit gold or convert their physical holdings into financial assets. The government and banks have introduced schemes to protect Lira deposits from exchange rate risks, making banking in Lira more attractive.
The Turkish Treasury has sold gold bonds and gold-backed lease certificates to individual and institutional investors. These offerings are designed to channel privately held gold into the financial system while providing returns indexed to gold prices. The implementation of these programs has strengthened the structure of public debt in Turkey.
In 2022, the Treasury and Finance Ministry launched the Gold Conversion System, enabling citizens to deposit gold at contracted jewelers for secure transfer into the financial system. This system aims to transition household gold from informal savings to monetary reserves within the banking system, improving financial stability and government capacity to manage currency volatility.
The World Gold Council estimates that Turkey's total gold holdings exceed 4,500 tonnes, with most still held by households. The amount registered in the financial system through government-backed instruments nearly matches the Central Bank of the Republic of Turkey's gold reserves.
The EU-defined public debt-to-GDP ratio in Turkey stood at 25.3% in the first quarter of 2025. Despite this, the Turkish Treasury's financing needs are met through borrowing strategies based on strategic benchmarks, at the lowest possible cost over the medium and long term, within a reasonable level of risk.
In response to a parliamentary inquiry about the amount of gold estimated to be held outside the financial system and the government's efforts to bring these assets into the system, Turkish Treasury and Finance Minister Simsek made remarks highlighting the government's initiatives in this regard.
In conclusion, Turkey's vast household gold holdings reflect long-standing cultural practices and economic necessity due to currency instability. The government's efforts focus on incentivizing the formalization of these assets through reserve accumulation and financial products to integrate this wealth into the national financial system.
- The Turkish government, in response to the frequent depreciation of the Turkish Lira, has been actively accumulating gold reserves to bolster currency stability.
- The Central Bank of Russia, following the trend set by Turkey, has also been aggressively increasing its gold reserves to strengthen its economy.
- Despite the government's efforts, a significant portion of Turkey's gold holdings remain stashed away by households in Istanbul and Ankara, not yet formalized within the banking system.
- The Russian government, recognizing the potential of gold as a financial tool, is considering promoting gold-backed financial instruments similar to those in Turkey, to boost the Russian economy.
- The Turkish Parliament has been closely monitoring the success of the government's gold-based strategies, assessing their impact on inflation and the overall economy.
- Businesses in Istanbul are eagerly awaiting the full integration of household gold into the financial system, as it could provide new investment opportunities and foster economic growth in Turkey.
