From the outside, it looks like any other automatic bank machine on the streets of Istanbul. But rather than notes, this one distributes small pieces of gold.
Gold is hugely prized in Turkey not just for ornamentation or investment by banks but as a secure way for private individuals to hold their savings.
Many people in Turkey – which has one of the lowest private savings rates among major economies – keep gold as security for a “rainy day” rather than products offered by banks.
According to estimates, Turks hold some 3,500 tons of gold. Banks have sought to capitalize on the tradition by offering accounts denominated in gold.
“We were thinking about putting all that gold back into the financial system somehow, so we decided to create gold accounts for our clients,” said Seda Yilmaz, marketing manager of the Kuveyt Turk Bank, the first to do so, in 2007.
“So we bought 1 kilo of gold, and the demand on the first day was 3 kilos. It was a very good decision, so we decided to move ahead.”
Eight years on, Kuveyt Turk manages 200,000 gold accounts with different products allowing sales by check, bank transfer or mobile phone.
Now with the introduction of the first ATMs that issue gold as well as the usual banknotes, consumers can withdraw pieces of gold weighing 1.0 or 1.5 grams.
The success of the ATMs started a trend, with many other Turkish banks latching on. The volume of gold in their reserves has gone from 2 tons in 2007 to 250 tons.
The government has also tried to join the bandwagon with the central bank allowing commercial businesses to hold some of their reserves in gold and opening this up to private investors.
“Thanks to this measure, our sales jumped 85 percent last year,” said Aysen Esen, head of a leading gold refinery in the country.
“Over the last two years, banks have taken in some 40 tons of gold that people had stashed under their beds. And it’s just a small proportion of the reserves.”
Even if exchange rate variations have an effect on activity and profits, Turks are the No. 4 global consumers of gold and No. 2 exporters.
“In 2013, recycling, fabrication and consumption [of gold] boosted the Turkish economy by at least $3.8 billion,” said Alistair Hewitt, author of a recent report published by the World Gold Council.
“The opportunity is huge. We are only at the early stages here, there is a huge potential.
“It’s looking very, very exciting ... all that infrastructure allows Turkey to become a gold trading hub within the region.”
Made a little jealous by the successes of banks in a market that they once had to themselves, Turkish gold jewelers staked their interest in joining the gold investment industry.
“We are a little bit disappointed. We may need new legislation and have this gold end up with the jewelers instead of the banks,” said Sarp Tarhanci of the Istanbul Chamber of Jewelry.
“Jewelers are customer-based, they build trust and good relationships with their clients.”
Turkey’s performance in 2014 remained strong, according to the latest figures published by the World Gold Council, even if purchases were down on the extremely strong 2013.
Demand for gold jewelry in Turkey fell 7 percent to 68.2 tons in 2014, “slightly more resilient” than the overall global trend of a 10 percent decline.
Meanwhile, investment demand of 54.8 tons was 46 percent below the previous year’s record 102.1 tons.
