A new report “Turkey: gold in action” from the World Gold Council, released today, explores the role gold plays in the daily life of the world’s fourth largest consumer of gold, as well as examining its contribution to supporting the national economy.
Turkey is a microcosm of the global gold market – a country which is home to the entire gold value chain from mining and refining, to jewelry design and investment. Its long tradition of gold demand, underpinned by a deep cultural heritage, strong fabrication capacity and a substantial coin market has resulted in households accumulating an estimated 3,500 tons (t) (US$145.3bn) of gold tucked “under-the-pillow”, a term used in Turkey to refer to physical gold stored by the general population.
Turkey: gold in action assesses the role that gold plays in consumers’ lives, examines the economic contribution of the entire supply chain and explores how the metal has been monetized to support the national economy. In 2012 alone, gold fabrication, consumption and recycling added at least US$3.8bn to Turkey’s economy. An innovative central bank policy introduced in 2011 incentivized commercial banks to create a range of gold-backed banking products to mobilize Turkey’s stock of gold. This improved the health of the banking sector by reducing costs and improving liquidity, as well as ensuring commercial banks boost their gold reserves. Policymakers have now successfully seen around 250t of gold (US$10.4bn) drawn into the financial system and put to work supporting Turkey’s economy.
Alistair Hewitt, Head of Market Intelligence at the World Gold Council said: “Amid a challenging global economic climate, Turkey faces ongoing political and social pressures to ensure that it steers a steady economic course. Gold represents many things in this society – from employment for over a quarter of a million people in the gold industry, to an investment protecting people’s wealth against the ravages of inflation and currency weakness. It is also a unique example to the rest of the world of how gold can successfully be put to work at the core of a nation’s financial architecture.”
Some of the key findings from the research include the following:
• Gold is deeply ingrained in Turkish culture. The use of gold coins as a medium of exchange was pioneered by merchants in Lydia – the precursor of modern Turkey - as far back as 700BC and continues to be one of the world’s largest official coin fabricators.
• Turkey’s long-standing desire for gold has resulted in households accumulating a large stock of gold tucked “under-the-pillow”. An estimated 3,500t of gold has been collected by households.
• Gold makes a significant contribution to Turkey’s economy. Gold fabrication, consumption and recycling added at least US$3.8bn to Turkey’s economy in 2012 alone.
• Gold is a small, but important cog in Turkey’s financial system. By the end of 2013, commercial banks held around 250t, equivalent to US$10.4bn, which had been put to work supporting Turkey’s economy. This includes 40t - about US$1.7bn - of Turkey’s “under-the-pillow” stock, which has been mobilized since mid-2012.
• With a well-developed post-production supply chain, Turkey has ambitions to become a regional refining and recycling hub. Turkey has a number of large-scale refiners which refine doré to internationally accepted LBMA standards as well as processing or recycling gold.
• Its gold mining industry is small, but growing quickly. Gold production has increased in almost every year since 2001, growing from 2t to 33.5t in 2013