Turkey: official inflation, unofficial solutions, hidden gold and rusted hopes

With an estimated value of $311 billion, the physical gold held by the population - nicknamed "the gold under the pillow” - far exceeds the official reserves of the Central Bank of Turkey and the gold savings kept in the banking system, according to a recent article published by the Turkyie Today newspaper. Although this impressive treasure is outside the formal financial circuit, its potential impact on an economy severely affected by inflation and currency volatility is major but insufficiently exploited, the cited source claims.

In Turkey, gold is not just a symbol of tradition or a simple ornament; it represents a financial anchor for millions of families and an informal mechanism for economic stabilization. This practice of keeping gold in households is deeply rooted in Turkish culture. In social life, gold is given at weddings, baptisms and celebrations, being both a symbol of prosperity and a form of savings passed down from generation to generation. Over time, however, gold has become more than a habit: it has become a shield against uncertainty. The cited source states that, in the face of inflation that, in 2022, reached a record level of 85.5%, the population has lost confidence in the national currency, the Turkish lira, and has turned massively to gold as a form of protecting savings. If jewelry dominated consumption in past decades, today more and more people are choosing bars and coins, which offer greater liquidity and a direct link to the international value of gold.

Turkey has been facing a current account deficit for years, and massive gold imports are significantly contributing to its deepening, say financial analysts consulted by Turlyie Today. According to them, between January and April 2025 the deficit reached 20.3 billion dollars, of which 6.27 billion were generated by the gold trade. But instead of entering banks or being invested, the imported gold remains in households, inaccessible to the financial system. This is where one of the biggest dilemmas of the Turkish economy arises: how can this latent national treasure be mobilized to support economic development, without compromising the confidence of the population? Over the decades, the authorities have repeatedly tried to bring gold into the financial system. From Turgut Ozal's initiatives in the 1980s, which offered foreign currency-backed accounts equivalent to the value of the deposited gold, to President Recep Tayyip Erdogan's public appeals in 2016, the strategies have been numerous, but the impact has been limited. In 2022, the government in Ankara launched a modern gold conversion system, through which citizens can deposit gold with accredited jewelers and receive bank certificates or guaranteed accounts in return. The Istanbul Stock Exchange even introduced trading in gold certificates backed by physical reserves. Although these products are attractive, tax-free, with low spreads and guaranteed against losses, they have not been able to replace the appeal of physically held gold, outside of institutional control. A major reason for this resistance among Turkish citizens is taxation, the source cited says, as bank deposits are taxed and large transactions are automatically reported to the authorities. In contrast, gold held at home is invisible to the state: it does not generate taxes, does not involve bureaucracy and offers financial autonomy. The recent introduction of a 0.2% tax on gold transactions through banks and the requirement to present an ID card for purchases over 185,000 Turkish liras have reinforced the belief of many that the formal system is not to their advantage.

Economists in Ankara and Istanbul told the cited source that informal gold has become a form of "parallel banking,” operating outside monetary policy but playing a crucial role in cushioning economic shocks. In times of crisis, families sell gold to cover their expenses, and when things stabilize, they start saving again, usually in gold. This cycle contributes to the existence of unrecorded capital flows, reflected in the balance of payments under the "Errors and Omissions” category. In essence, the gold under the pillow becomes an informal macroeconomic stabilizer, able to provide liquidity where the banking system cannot reach.

But this solution also has a downside. In the absence of integration into the financial system, these huge reserves do not contribute to credit, productive investment or job creation, cannot be used to control the money supply or to strengthen fiscal policies. It is a form of passive wealth, which, while protecting individuals, limits the state's ability to respond effectively to structural challenges.

Thus, Turkey finds itself in an economic paradox: it has one of the largest gold reserves in the world, held by the world's population, but cannot use them effectively to support its economy. Between tradition and modernity, between individual freedom and the need for macroeconomic planning, the gold under the pillow remains both a treasure and a bottleneck. And until a bridge of trust is built between the citizen and the state, this wealth will continue to sleep peacefully, hidden, but essential.