ISTANBUL— After twelve consecutive years of decline, the Turkish lira enters 2026 seeking a fragile path to stability. Following a decade of hyperinflation and unorthodox monetary policies under President Recep Tayyip Erdoğan, Turkish citizens have turned to the ultimate safe haven: gold. An estimated 5,000 tons of gold, valued at approximately $705 billion, is now held "under the mattress" across the country—a staggering record that reflects a total loss of confidence in the national currency.
While 2026 is unlikely to witness a miracle rebound, financial analysts surveyed by Bloomberg suggest the "death spiral" may be slowing. The lira is projected to decline by 13% over the coming year, a slight moderation compared to the 17% drop experienced in 2025. This relative calm follows a year of extreme political and financial upheaval, notably triggered by the March 2025 arrest of Istanbul’s mayor and prominent opposition figure, Ekrem İmamoğlu. The move led to massive capital outflows and saw the dollar and euro end the year at 43 lira and 51 lira, respectively.
The Weight of "Under-the-Mattress" Savings The sheer volume of gold held by Turkish households has become a double-edged sword for Ankara. While it protects individual wealth from purchasing power erosion, it keeps nearly 10% of the national GDP outside the formal banking system. In late 2025, the Central Bank of the Republic of Türkiye (CBRT) reported that its own total international reserves hit $192 billion, bolstered largely by the rising value of its gold holdings.
To bridge the gap, the government has intensified efforts to lure this private treasure back into the economy. New gold-protected deposit schemes were launched in December 2025, promising returns linked to both interest rates and the gold price. However, with inflation still hovering around 31%—its lowest in four years but still punishing—many Turks remain skeptical of any state-led "liraization" strategy.
Political Risk and the 2026 Outlook The detention of İmamoğlu, who was widely expected to be the primary challenger in the 2028 elections, continues to haunt Turkish markets. The İstanbul Stock Exchange saw its worst single-day decline in years (nearly 9%) following his arrest, and Credit Default Swaps (CDS) remain elevated. As Nuri Aslan continues to serve as acting mayor of Istanbul, the lack of political resolution remains a primary driver of market volatility.
For 2026, the Turkish government’s "turning point" hinges on a return to traditional economic principles. While the CBRT has begun implementing carry trade curbs to ensure financial stability, the real test will be whether the state can convince its citizens to move their 5,000-ton golden safety net back into a system they have spent a decade learning to distrust.
Frequently Asked Questions (FAQs)
Why do Turks keep gold "under the mattress"?
Due to years of hyperinflation and a lack of trust in the banking system, many Turks prefer physical gold (jewellery or coins) as a hedge. This traditional saving method, known as "under-the-mattress" (yastık altı), ensures that their wealth is not erased by the lira’s devaluation.
How much gold is actually held by Turkish citizens?
Estimates from the World Gold Council and Turkish Treasury suggest approximately 5,000 metric tons. At current 2025 market prices, this is worth roughly $705 billion, making the Turkish public one of the largest "central banks" in the world.
What was the impact of Ekrem İmamoğlu’s arrest on the economy?
The arrest in March 2025 caused an immediate financial crisis, leading to a 16% drop in the lira's value within days. It triggered massive protests and foreign capital flight, as investors feared for the rule of law and political stability in Turkey.
Is inflation in Turkey finally under control?
While inflation eased to 31.07% in late 2025—the lowest since 2021—it remains significantly higher than the global average. Analysts expect a slow descent toward 16% by the end of 2026, provided the government maintains its current tightening cycle.
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