Roundup: Turks rush to buy gold over weak currency, inflation

Source: Xinhua| 2020-10-22 01:59:01|Editor: huaxia

ANKARA, Oct. 21 (Xinhua) -- A weakening currency and elevated inflation in Turkey have pushed the demand for gold, which has been used as a traditional means of savings for Turkish households, to high levels.

The Turkish lira has lost about 25 percent of its value since the start of this year against the U.S. dollar, highlighting that Turkey's already existing economic vulnerabilities were worsened by the COVID-19 pandemic.

With huge foreign-currency public and corporate debts, as well as high inflation and unemployment, the Turkish currency went down gradually to 7.91 liras against 1 dollar this week, while 8 liras against 1 dollar was generally considered by the economists as "psychological threshold."

In this volatile context, investing in gold and the greenback have become households' preferred way to protect their savings at home or in gold accounts in banks.

In a jewelry shop in Ankara's Oran neighborhood, gold prices are hand-written on a sign near the entrance as prices change every day.

"Each morning, we write the price of gold on the sign. Especially since the start of summer, there has been a significant increase in the number of people buying gold," Selcuk Uzun, manager of the shop, told Xinhua.

"Gold is bought mainly for safekeeping the value of one's wealth and people want to make sure that their savings don't evaporate over time because of inflation ... some people also bought gold for weddings," Uzun noted.

He said that since the start of this year, gold has gained value by some 65 percent because of the volatility in the forex market.

Turkey's inflation rate stands at 11.75 percent in September, according to official data. Analysts predict that there is very little chance for year-end inflation to decrease to single digits.

The gold owned by citizens is estimated between 25 and 40 percent of the nation's gross domestic product (GDP), a huge amount that the state is seeking through various schemes to shift into the financial system, yet with limited effect so far.

From January to August, Turkey imported 15 billion dollars in gold, up 153 percent from a year ago, according to the Turkish Trade Ministry. Gold imports put a strain on a widening current account deficit.

Turkey is also an extractor of gold and its production is expected to reach 100 tonnes by 2025, the country's Energy and Natural Resources Minister Fatih Donmez recently said.

Turkey plans to produce up to 45 tonnes of gold in 2020 despite the COVID-19 pandemic, he said, quoted by Daily Sabah.

Turkey imports an average of around 150 tons of gold per year, the minister said, noting that the imports would significantly drop once the country reached its production target.

Independent economist Ugur Gurses argued that the huge interests for gold assets among Turkish households somehow showed the public distrust of the government's economic policies.

"There is an extraordinary increase in foreign currency and gold deposits in the country," he said in his blog, indicating that Turks have rushed to purchase gold after the lira dropped to record lows against major currencies in the past months.

Gurses remarked that a series of political and economic crises, such as the foiled military coup attempt in 2016 and a currency meltdown in 2018 over a diplomatic row with the United States, have increased the Turks' appetite for gold hoarding amid a declining economy. Enditem