www.goldinvestingnews.com -Gold is a favored investment in Turkey and innovation may cause its popularity to grow. In 2011, the country’s total gold demand rose
about 32 percent to reach 143 tonnes, according to the World Gold
Council (WGC). That marked the first time that investment demand
accounted for the lion’s share of total consumer demand. With investment
products ranging from the basics – such as coins and a gold ETF – to
more innovative services like gold deposit accounts and gold ATMs, this
demand source has significant potential. (source)
Gold is a common part of Turkish culture and is often given for
special occasions such as births and weddings. It is also a highly
trusted means of saving. Turkey is no stranger to inflation, and many
people prefer storing their wealth in real estate or the yellow metal as
opposed to banks.
In 2011, Turkey’s savings
rate dropped to the lowest level in the world for any economy larger
than $100 billion – other than Greece, Portugal, and Ireland.
But even as the lira tumbled almost 20 percent against the dollar,
the Wall Street Journal said demand for coins and bars rose 99 percent.
The Istanbul Gold Refinery estimates that individuals have about
5,000 tons of gold valued at $270 billion stashed away. These
“under-the-pillow” savings mean that there is a massive amount of wealth
within Turkish borders that does nothing to benefit the overall
economy. Yet the government is struggling to manage a deepening current
account deficit.
Turkish officials want to channel the nation’s gold investments in a
manner that will benefit the economy. One way that they are doing this
is by encouraging the build up of gold reserves to increase liquidity by
freeing up cash.
Last year, Turkey’s central bank announced that 10 percent of a bank’s reserve
requirements for foreign currency liabilities can be maintained in
gold. Later, the central bank allowed a further 10 percent of the
reserve requirements for Turkish lira liabilities to be maintained in
gold.
The government’s goals are coupled with a growing Turkish trend known as gold banking.
Gold banking
Traditionally, there were two ways to invest in the metal – jewelry
and coins – and women were the primary investors. Now an array of new
investment products is making gold appeal to a wider market.
Atasay, one of Turkey’s top jewelers, has reportedly
agreed to venture into this innovative realm of gold banking with two
of the nation’s largest banks. Atasay’s role is to collect gold from the
public. Under this system individuals can report to a jewelry store,
exchange gold jewelry for a certificate, and then to take that
certificate to a bank to have the equivalent amount of Turkish lira
deposited.
Another bank, Kuveyt Turk, part of the Kuwait Finance House group, is
aiming to be a leader in this sector and thus offers a wide array of
gold products.
Gold deposit accounts, for example, allow people to buy and sell
small amounts of gold through the banking system. The minimum
transaction is 0.01 grams. When ready, clients have a number of options
for redemption, including transferring value to a lira account,
withdrawing bullion, and drawing a Gold Cheque.
Gold-to-Gold participation accounts can be opened with as few as 10
grams of gold. The client then chooses a maturity period of three
months, six months, or one year. Over the chosen time period the metal
is “put to good use in the real sector.” Upon maturity, there is an
85/15 split of the profits and the gold principal is returned to the
account holder, who also receives the larger share of the profits paid
out in gold.
Another product, Gold-Indexed Finance, is a funding option for
individuals and companies that work with the metal. It allows them to
obtain credit and repay the debt in installments of gold or the cash
equivalent of the required amount of gold at the metal’s current rate on
the due date.
But the gold ATM may be one of the bank’s most innovative ideas. Kuveyt Turk is credited as the first bank in the world to offer individuals the opportunity to purchase gold bullion at their convenience from a machine.
The WGC described this initiative as a new and exciting trend that
will be followed more closely as it gains universal acceptance.
Turkey’s central bank has also been active in the market. In 2011,
the institution increased its gold reserves by 79 tonnes, bringing its
total official holdings to 195.3 tonnes. This year, the bank has
continued bolstering its reserves with official holdings, and has
increased them to 209.6 tonnes as of the end of March.
The WGC expects developments in the gold industry to have positive
long-term implications for the market. The initiatives by government and
commercial banks are thought to support expectations of strong
potential growth in investment demand.
Kuveyt Turk also has a positive outlook, estimating that government
and private entities will sell 11.5 million units of bullion in 2012, as
opposed to the 10.7 million sold last year.
Turkey’s domestic supply
Though Turkey has a penchant for gold, the nation has seen sharp
declines in domestic supply in recent years. Total domestic supply
peaked in 2009 at 231.8 tonnes, according to the World Gold Council.
Though mine supply has continued to increase, total supply in 2011
declined to 98.6 tonnes due to the sharp reduction in recycled supply.
This development could be positive for gold producers elsewhere. The
WGC said Turkey may need to increase imports to meet further recovery in
Turkish gold demand and declining recycled gold flows.
Source: http://goldinvestingnews.com/25983/turkey-driving-demand-with-innovation-world-gold-council-atasay-kuveyt-turk-turkey.html - June 20, 2012
