Looking to the week ahead

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21

Is it 0.7% by weight or by value?

22

Hi Matt, in Turkey there are quite a few gold coins that are legal tender. ordinary people do buy/sell these coins with very little spread and since Turkey experienced high rates of inflation during 90s it is somewhat of a “habit” so gold accounts/gifts/transactions etc are part of daily life.

Koos Jansen has a decent summary here if you are interested: https://www.bullionstar.com/blogs/koos-jansen/the-turkish-gold-standard-part-1/

So in a “gold account” with or without interest there is not anything like “value” on a ledger. There are two things: its purity and weight. Most banks will only use .995 and/or .999 as purity. So you do get interest in grams of gold as there is no other intrinsic value attached to the account.

Also if you looked in to the article above, national banks can hold a big chunk of their cash reserves as gold in central bank, which is something they like doing. If you think about it inflation rate in Turkey is still in double digits, it is a huge advantage for the bank to hold their cash reserve in gold and not it TRY. So depending on their requirements on that day" they might pay huge interest rates to attract customers quickly.

Interest rates will vary between bank to bank a lot tho. For example HSBC pays only 0.25% and requires a 300gr initial deposit and gives no higher rate for longer deposit times than 32days. (https://www.hsbc.com.tr/en/daily-banking/accounts/gold-account)

Usually the bigger the bank, the lower the interest rate, the smaller the bank the higher the interest rate.

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That makes sense, and yes I can understand smaller “riskier” banks having to offset that by more lucrative higher rates

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Here is one with 1.25% interest :slight_smile:

https://www.teb.com.tr/esnafim/vadeli-altin-hesabi/

if i translate those rates for you:
Term -> Annual interest rate
1 month -> 0.5
3 months -> 0.75
6 months -> 1.0
1 year -> 1.25

Disclaimer by the way, I am obviously not a financial adviser nor an affiliate or related to these banks, just sharing information here.

25

Just hedge them, stocks that are negatively correlated.