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Turkey wants gold savings to shore up ailing lira

XINHUA logo XINHUA 15/02/2022 BurakAkinci
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A woman looks at gold in a jewelry store in Ankara, Turkey,on Feb. 14, 2022. (Photo by Mustafa Kaya/Xinhua)

As Turkey is battling economic woes and low foreign currency reserves, authorities want to draw the yellow metal stored by citizens into the banking system.

by Burak Akinci

ANKARA, Feb. 15 (Xinhua) -- Gold has a central place in Turkish customs from birth to weddings. As the country is battling economic woes and low foreign currency reserves, authorities want to draw the yellow metal stored by citizens into the banking system.

As Turkey's annual inflation surged to a two-decade high of 48.7 percent in January, while the local currency lira was steeply depreciating against the U.S. dollar, the government tried to encourage citizens to bring the so-called "under the mattress" gold worth billions of dollars into the system to save the lira.

"Under the mattress" gold is a term describing the asset stored by Turkish citizens at home as a buffer against rising prices and currency devaluation.

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Gold in a jewelry store in Ankara, Turkey, on Feb. 14, 2022. (Photo by Mustafa Kaya/Xinhua)

Turkey's Treasury and Finance Minister Nureddin Nebati announced on Saturday in Istanbul, Turkey's financial hub, a new scheme of converting households' gold into lira.

As of next month, citizens will be easily and safely deliver their gold savings to the financial system via banks and jewelry stores, he said.

This plan aims to strengthen the lira by depositing 5,000 tons of gold into the banking system, which is equivalent to nearly 350 billion dollars.

Nebati said part of that amount will support the Central Bank's foreign currency needs.

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A jeweler display gold at a jewelry store in Ankara, Turkey, on Feb. 14, 2022. (Photo by Mustafa Kaya/Xinhua)

In a jewelry shop in capital city Ankara's bustling neighborhood of Kizilay, consumers are making an inquiry as the gold price in the Turkish Lira change daily.

"Culturally, gold has a prominent influence and place in the daily life of Turks, they use it mostly as a commodity besides adornment purposes," Ismail Yuksek, a veteran jeweler who deals in an alley full of gold jewelry stores.

During an economic storm, Turkish people put the gold "what we call under the mattress to protect their savings against price fluctuations," Yuksek said.

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Gold in a jewelry store in Ankara, Turkey, on Feb. 14, 2022. (Photo by Mustafa Kaya/Xinhua)

In Turkey, gold is broadly considered a form of a traditional gift for weddings, births and other ceremonies. When a child is born, a gold coin is given to the family as a sign of a good omen, the dealer explained.

At weddings, giving gold coins or jewelry to the bride and groom holds an inescapable role of delivering good wishes.

"Gold is currently the second commodity used by Turks after money" that can be bought and sold, he added.

Historically, the Turkish people have used gold as saving and investment to protect their savings from inflation. There are even gold certificates and various gold-based investment funds offered by many banks.

Yuksek said that "Turkish people want their gold by their side physically."

Previous governmental attempts to convert gold held by citizens have had limited results.

According to Turkish economist Mustafa Sonmez, the fresh scheme would be less effective than expected. "People do not believe that the current measures will bring the end of economic woes and will largely not surrender their gold savings," he said.

Around 76 percent of respondents in a January survey by Turkish pollster Metropoll said the economy was poorly managed. Only 20 percent think that the economy was going in the right direction.

To combat dollarization and gold hoarding, the Ankara government announced last December its foreign currency-protected lira deposits scheme, which encouraged the transfer of foreign-exchange deposits into exchange-rate-protected lira.

The scheme has had some success, attracting around 23 billion dollars, but has not ended the popular mistrust of the devaluing lira, according to experts. 

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