Turkish gold conversion plan likely to falter on lack of public trust
Categories: FOREIGN COUNTRIES
When Turkish finance minister Nureddin Nebati this week announced plans to encourage households to convert their gold holdings into Turkish liras in a bid to shore up Turkish central bank reserves, he was targeting people like Esra G.Ms. G., whose last name has been abbreviated to preserve her anonymity, has had a life-long troubled relationship with gold. When she was barely three years old, her distaste for it as an adornment was already so strong that she dumped all her gold rings, bracelets, necklaces, and earrings into the Bosporus. Nonetheless, Ms. G. grew up to be an avid collector of gold, including an assortment of five- and 10-gram Credit Suisse coins. As a young woman, Ms. G. preferred antique silver jewelry and wouldn’t wear gold but kept her gold collection under her pillow."Gold is a tradition. It grows out of a deep-seated distrust of governments and currencies and has been handed down from generation to generation. They didn't take money. They took gold," she said. "I'm a child of that system. ... I want the gold where I can touch it and feel it." It is the many people like Ms. G. that Mr. Nebati is targeting. The minister told investors in London this week that he hoped his scheme would convert 10 percent of the estimated US$250-300 billion worth of gold squirreled away in the homes and back yards of Turkey, much of it by women. According to the World Gold Council, official Turkish gold reserves dropped from a high of 583 tonnes in July 2020 to 392 tonnes a year later. Speaking to Sabah, a pro-government daily, Ms. Esen, probably unwittingly, suggested that convincing Turks to convert their gold could prove to be an uphill battle. She noted that a program launched ten years ago by the refinery and commercial banks had so far netted a mere 100 tonnes of hidden gold.She, like many Turks, is historically suspicious of authority, and many of them see hoarding gold not only as a safe investment but also as a reserve that can't be taken away from them. It also doesn't violate the Islamic ban on interest. "I've been in this business for decades and have seen a lot of change. One thing never changes, and that is gold. Our money is worthless; gold is much better. Besides that, gold is part of our history," added a jewelry repair shop owner.Trust as much as tradition may prove to be Mr. Nebati’s Achilles heel. As a result, a whopping 75 per cent of respondents in a survey in December by Metropoll, a Turkish polling company Metropoll, said their trust in the government’s economic policies had decreased. More than half of those polled said they disapproved of Mr. Erdogan’s performance.Mr. Erdogan’s numbers hardly project the degree of confidence that Mr. Nebati is likely to need to persuade his intrinsically skeptical compatriots from parting with their precious gold. Said a former Istanbul banker: “People are unlikely to put their holdings at risk for a scheme that does not guarantee their ability to preserve whatever wealth they have. Certainly not at a time of economic turmoil and a widening gap in trust.”