Turkish gold stays outside banks despite Erdoğan incentives
At the bustling Mahmutpaşa Yokuşu market in the heart of Istanbul, 23-year-old bride-to-be Nefise Asker browsed wedding outfits, planning the gold she expects to receive when she marries. “We’ll share the gold as a couple to support our new life together,” Asker said.
The wedding gift tradition sits inside a broader Turkish practice known locally as yastık altı — “under the pillow” — of storing wealth in physical gold or foreign currency beyond the reach of formal banks. The Turkish finance ministry estimates households are holding roughly 5,000 tons of gold, which the head of the Turkish Central Bank values at approximately $600 billion at current prices.
Historically the gold functioned as financial insurance for wives who did not work outside the home, according to Selva Demiralp, an economist at Istanbul’s Koç University and a former economist for the Turkish Federal Reserve. “If everything goes south, you still have your gold that is gifted to you during your wedding, and that will be your lifetime savings,” Demiralp said.
But Demiralp emphasizes that the behavior, once explained, looks less irrational than its critics suggest. “Once you look at why people do this, it stops looking irrational actually, and it’s a very rational response to a long history of high and unpredictable inflation, a few banking crises people still remember, and a general sense that the lira just doesn’t hold its value the way gold does,” Demiralp said.
Annual inflation is hovering around 31 percent — one of the highest rates in the world — and the lira has weakened steadily as daily living costs have climbed. In Istanbul’s historic Grand Bazaar, Mehmet Yıldırımtürk has worked as a currency exchanger and gold seller for more than 50 years. “Gold is a vital tool for Turks,” Yıldırımtürk said. “It helps protect them, especially from inflation.”
Beyond hedging against price increases, the gold hoarding reflects what Demiralp’s research describes as a systemic credibility gap between households and the institutions meant to manage and report on the economy. In a survey her team conducted, respondents were asked to rate trust in key economic institutions on a zero-to-10 scale. “Nearly four in 10 rated their trust in commercial banks close to zero,” Demiralp said. Trust in the statistical agency was lower still, she said, with over half of respondents putting it in the same near-zero range.
Demiralp attributed the bank mistrust to a combination of historical economic trauma, persistent inflation, and a broader credibility gap. “If you think inflation is going to run nearly 50% and the deposit rate you are being offered doesn’t come close to compensating for that, then gold looks like a safer bet in real terms,” Demiralp said. “When we ask people directly what they plan to do with their savings going forward, gold is by a wide margin the single most popular answer.”
Economists warn the scale of the hoard carries heavy costs for the broader economy. “It’s not being lent out to businesses,” Demiralp said. “And a good chunk of the gold has to be imported every year, which adds to the current account deficit. So it’s capital that’s parked rather than working.”
If the gold flowed into the formal banking system, Demiralp argues, economic authorities would gain an accurate read on household liquidity, design more targeted macroeconomic policies, and restore the central bank’s ability to influence demand — steps she says are necessary for price stability, attracting foreign investment, and reducing unemployment.
President Recep Tayyip Erdoğan has repeatedly urged Turks to bring their gold out from under their mattresses, and his government has rolled out multiple programs over the years offering incentives to convert physical gold into bank deposits. “This brings no benefit to either my people themselves or to my state,” Erdoğan said in a 2023 Cabinet speech.
Those initiatives have largely failed, critics say. They point to Erdoğan’s unorthodox economic policies and heavy-handed control over financial institutions — including firing six bank heads over seven years — as key factors fueling public skepticism.
“The gold just isn’t coming out from under their pillows,” Yıldırımtürk said. “The government just hasn’t been able to provide that confidence yet.”
Asker, for her part, has no intention of depositing her wedding gold in a bank. “I’ll probably not put it under my pillow like in the olden days,” she said. “But for sure, I’ll hide it in a box at home.”