Gold Investment Preferences of Turkish Households

This article aims to evaluate the gold investment preferences of Turkish households in terms of gold-based lease certificate products and gold bonds in light of the findings of the Household Financial Perception and Attitudes Survey with reference to the concept of "overconfidence bias" in behavioural economics/finance literature.

The Findings of the Household Financial Perception and Attitudes Survey Are Expected to Contribute to the Strategies to Be Developed by Policymakers

"The National Household Financial Perception and Attitude Survey" was conducted by Barem Pazar Araştırma ve Danışmanlık AR-GE Merkezi (Barem Market Research and Consultancy R&D Centre) for Finance Office under the Presidency of Turkey. The survey was carried out in 49 cities and with 15,041 interviewees who decide on investment matters or take a role in the decision process, with a view to determining their perceptions about the current financial system, investment preferences and driving factors of these, their tendency to save outside the financial system, perceptions, and expectations for new financial products. The research was made public in December 2020 with the participation of the president of the Finance Office under the Presidency of Turkey, Prof. Dr. Göksel Aşan. The research emerges as a highly fundamental resource that needs to be emphasised for its representation capability as it covers 89% of the total households and 92% of GDP. It is expected that the findings of the research will provide input for the future strategies and decisions of policymakers.

It Is Seen That the Gold Bond and Gold-Based Lease Certificate Campaign Has Not Produced Very Effective Results, and People Do Not Tend to Give Up on Physical Gold Investments

According to the research, we see that around 47% of the people remembered the gold bond and gold-based lease certificate campaign of the Ministry of Treasury and Finance, 2.4% stated that they participated in the campaign, and only 20.7% stated that they could participate in a similar campaign that could be held in the near future.

43% of the people stated that they preferred to have their physical gold in their hands, and 37% of the people stated that they did not find the campaign credible under the reasons of not participating in the campaign.

We See Psychological Factors at the Root of People's Preference of Physical Gold Investment

With the aim of adding the gold, which is outside the scope of the financial system and estimated to be at least 2,200 tons, to the economy and strengthening the country's reserves, the reasons for not participating in the gold bond and gold-based lease certificate campaign, which is initiated at certain times by the Ministry of Treasury and Finance by offering a certain amount of income to individual investors who have invested in physical gold, to turn gold into a credible investment away from the risks of stealing, losing and without costs, can be explained with the concept of "loss aversion bias" that we find in the behavioural economics/finance literature. When we evaluate the "loss aversion bias", which states that the pain/sadness felt by people when they lose something can be greater than the pleasure/happiness that the same amount of gain can make people feel and can be the dominant factor that determines people's preferences and directs their behaviour; we see that individual investors with physical gold regards investing their physical gold to gold bonds and/or gold-based lease certificates as a significant loss and don't perceive the possibility of earning an income without the risks of theft or loss under the guarantee of the state within the framework of gold bond and/or gold-based lease certificate investment as a gain and prefer to have physical gold in their hands. The same research also points out qualitative findings that lead to a strong perception of gain underlying the background of preferring physical gold investments. Qualitative findings such as the society's prestige and wealth perception of gold, its preference especially by women for its accessory and jewellery status, the easy reach of physical gold held at home, and the high control feeling it inspires in people, its relatively high liquidity appear as factors that prove/support the perception of gain and avoidance of loss stated above.

Instructor Ramazan Baş

Instructor at Kütahya Dumlupınar University