More than $450bn of gold hidden under Turkey’s mattresses

• Equates to 30% of Turkey’s GDP
• Gold holdings increase in stressful times
• Limited success depositing in banks

Turkish weddings are laden with tradition, with nuptials usually celebrated in summer and gold the gift of choice for the bride and groom, with specially minted coins pinned to the happy couple’s clothes. 

However, while summer is heating up and vows are being exchanged, the traditional precious metal seems to be off the guest list this year.

“The tradition of pinning gold has transformed into an instrument of savings,” financial analyst İslam Memiş tells AGBI.

This becomes even more pronounced in times of economic stress or tensions, such as those arising out of the ongoing conflict between Iran and Israel, he says.

“Gold loves misty weather, wars and inflation, and this always leads to higher demand both in Turkey and the world.”

While some Turks lodge their gold in banks, the vast majority is held privately. 

“Under the mattress” is the Turkish term used for such holdings, with estimates of 4,500 tonnes or more of gold being tucked up in bed and out of circulation. At current prices, this corresponds to some $450 billion, around 30 percent of Turkish GDP.

Long-time gold trader Reşat Yılmaz however believes the amount of bullion held in private hands is far higher than most estimates, a result of long-running economic uncertainty.

“The trend to put gold under the mattress has picked up since the pandemic and my evaluation is that since then the amount under the mattress in Turkey has risen to between 6,500 and 7,500 tonnes,” he says.

“Since the pandemic, the undervaluing of the lira against other currencies and the under-performance of the lira against inflation has prompted people to buy into gold.”

If this under-the-mattress gold was brought back into the economy, it would have a major impact, he says, reducing the deficit and stimulating growth, though this is unlikely to happen.

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“People do not trust the banks, the system, nor economic policies,” says Yılmaz. “The state has to come up with a very strong and appealing scheme to attract this gold.”

Previous efforts to entice Turks to convert their bullion holdings into lira or to deposit it with banks have met with limited success.

The latest appeal in 2020 that allowed locals to lodge gold with state banks and to withdraw physical gold rather than its lira equivalent did little to reduce the lumps under Turkish mattresses. 

“Over the past decade the treasury had been working on ways to attract this money,” says Memiş. “These efforts have not had much success because people who have gold feel safe and do not trust the system and because of that they continue to buy.”

“People feel more secure with physical assets and with the loss in value of the lira, gold provides some protection against inflation.”

The government has also sought to wean Turks off their gold habit, imposing a limit of 12 tonnes for monthly imports in August 2023 that curbed supply to the market and pushed up prices above international rates. 

The quota system aimed to reduce domestic demand for gold and ease the trade deficit, with bullion imports – along with oil and gas – being significant contributors to the trade shortfall. 

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According to Turkey’s Finance and Treasury Ministry data, gold imports accounted for 39 percent of the trade deficit in 2022, the last full year before the restrictions were imposed. 

Though having some success, the sharp rise in gold prices over the past year, set to spike further with the rising tensions in the Middle East, have more than offset any gains from the policy, with gold imports again a major factor in Turkey running a trade deficit. 

In troubled times, it is hard to see gold accepting invitations to weddings or into the national economy.