Turkey's gold hoarding tradition undermines economic stability, officials warn
In Turkey, the centuries-old tradition of storing wealth as physical gold has become a significant economic liability, according to government officials and economists who warn that hundreds of billions of dollars hidden in homes are preventing the country from achieving financial stability.
Turkish households currently hold approximately 5,000 tons of gold—worth roughly $600 billion at current prices—outside the formal banking system, according to the Turkish finance ministry and central bank. This practice, known locally as yastık altı or "under the pillow," reflects deep-seated mistrust of financial institutions and serves as protection against chronic inflation that has plagued the country since 2019, when double-digit inflation became entrenched.
At Istanbul's historic Mahmutpaşa Yokuşu market, the tradition continues with each generation. Nefise Asker, a 23-year-old preparing for her September wedding, is among those who will receive gold as gifts—a custom that historically provided financial security for women who did not work outside the home. "We'll share the gold as a couple to support our new life together," Asker explains.
The practice extends far beyond newlyweds. Inflation currently hovers around 31% annually, among the highest rates globally, though the Central Bank revised its year-end forecast upward in February 2026 to between 15% and 21%, indicating persistent difficulties in controlling price increases. The Turkish lira has weakened approximately 17% against the dollar over the past year, reaching record lows above 48 lira per dollar in August 2026—a stark contrast to the 1.10 exchange rate in 2008.
Historical roots of distrust
The preference for physical gold over bank deposits stems from painful economic memories. Turkey experienced severe banking crises in 1994 and 2000-2001, with the latter requiring a rescue package costing approximately $47 billion—equivalent to one-third of the country's national income at the time. During the 2001 crisis, overnight interbank borrowing rates soared to 4,500% as the Central Bank struggled to defend the currency before allowing the lira to float and depreciate by approximately 40%.
Research from Koç University reveals the extent of institutional distrust. Selva Demiralp, an economist at the university and former Turkish Federal Reserve economist, surveyed public confidence in economic institutions. "We asked people directly how much they trust the country's key economic institutions on a 0 to 10 scale, and nearly four in 10 rated their trust in commercial banks close to zero," Demiralp notes. Trust in the statistical agency was even lower, with over half of respondents placing it in the same near-zero range.
"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 explains.
The credibility gap extends to official economic data. An independent group of economists known as ENAG publishes alternative inflation figures that differ significantly from government statistics, reporting 53.4% year-on-year inflation in January 2026 compared to the official rate of 30.7%.
Economic consequences
The gold hoarding practice creates severe economic headwinds. Turkey imported approximately $23.13 billion worth of gold in 2025, making gold the country's single largest import product by value and accounting for 6.35% of total imports. These imports contribute directly to the current account deficit, which widened significantly in early 2026 to $23.7 billion in the first quarter compared to $14.1 billion in the same period of 2025.
"It's not being lent out to businesses," Demiralp says of the hidden wealth. "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 hoarded gold were deposited into the banking system, economic authorities could track exact liquidity volumes, observe account behaviors, and design effective macroeconomic policies based on real data rather than estimates. This would restore the central bank's ability to influence economic demand and make monetary policy tools effective again.
Previous government efforts have shown mixed results. The current account deficit narrowed to $9.97 billion in 2024 from nearly $40 billion in 2023, partly due to interest rate hikes and gold trade restrictions. However, the recent widening of the deficit demonstrates the challenge's persistence.
Failed government initiatives
President Recep Tayyip Erdoğan has repeatedly urged citizens to bring their gold into the banking system, launching various incentives and programs to convert physical gold into deposits. "This brings no benefit to either my people themselves or to my state," Erdoğan declared in a 2023 Cabinet speech.
These efforts have largely failed to change behavior. Critics point to Erdoğan's unorthodox economic policies and frequent leadership changes—the Central Bank has had five governors in five years, with current governor Fatih Karahan taking office in February 2024—as factors fueling continued skepticism.
At the Grand Bazaar, Mehmet Yıldırımtürk, who has worked as a currency exchanger and gold seller for over 50 years, observes the stalemate. "Gold is a vital tool for Turks," he says. "It helps protect them, especially from inflation. The gold just isn't coming out from under their pillows. The government just hasn't been able to provide that confidence yet."
Bride-to-be Asker echoes the sentiment shared by many Turks. She has no intention of depositing her wedding gold into a bank account. "I'll probably not put it under my pillow like in the olden days," she says with a smile. "But for sure, I'll hide it in a box at home."
