Turkey’s deep-rooted gold culture—once seen as a safe hedge against economic uncertainty—is now complicating its central bank’s battle to bring inflation under control.
With gold prices soaring to record highs, Turkish households are collectively sitting on an estimated $500 billion worth of privately held gold reserves, often referred to as “under-the-mattress gold.” The Central Bank of Turkey says this hidden wealth has grown by more than $100 billion in the past year, fueling a wave of consumer spending and adding new pressures to an already heated economy.
Gold prices climbed above $4,000 an ounce this week before easing slightly, amplifying what economists call the “wealth effect”—where people spend more when they feel wealthier. According to investment firm Is Portföy, another 10% jump in gold prices could generate an additional $50 billion in household wealth.
“Such a large concentration of wealth in gold means that rising prices can stimulate consumption,” explained Liam Peach, Senior Emerging Markets Economist at Capital Economics. “That, in turn, could slow Turkey’s disinflation efforts.”
Inflation Pressures Mount
Turkey’s inflation challenge remains one of the most persistent in the Middle East region. Despite aggressive monetary tightening, annual inflation unexpectedly rose to 33.3% in September, up from 33% a month earlier, largely driven by higher education and housing costs.
Central Bank Governor Fatih Karahan told lawmakers that the surge in gold wealth is boosting domestic demand, citing a study showing that cities with higher household gold holdings have seen stronger home and car sales.
“Turkey’s historical experience with inflation is why our people continue to keep substantial savings in gold,” Karahan said.
A Regional Economic Balancing Act
Turkey’s situation underscores a broader Middle Eastern trend—where traditional wealth preservation tools like gold still play a powerful role in household finances. While the government targets 24% year-end inflation, the central bank’s own forecasts place it closer to 25–29%, and markets expect it to stay above 30% amid persistent consumer demand.
For policymakers, Turkey’s $500 billion gold hoard is both a symbol of resilience and a major obstacle in stabilizing one of the region’s largest economies.
