Poland bought 15 tonnes of gold. We must be prepared for the worst, says Governor
14. 06. 2023
The trend of extraordinary gold purchases by central banks continues. Like the Czech National Bank, Poland is also expanding its gold reserves. In April, they bought about fifteen tonnes of gold, thus beginning to implement the previous announcement by the Governor of the Bank of Poland (NBP) in 2021.
The Bank of Poland expanded its reserves of precious metal from 7,352 to 7,828 million troy ounces and, converted into tonnes, its reserves increased to 243.5 tonnes and are currently worth PLN 64.8 billion (about EUR 14.6 billion).
After 2008, Western central banks stopped selling off their gold reserves and Eastern countries, especially China and Russia, started buying gold more actively. In 2018, Poland and Hungary joined this group, making their first gold purchases within the European Union.
This year's purchase by the Bank of Poland followed a previous major transaction in 2019, when Poland added 100 tonnes of gold to its vaults. In 2021, NBP Governor Adam Glapiński stated that if he remains in office for another six years, he would like to increase Poland's gold reserves by up to another 100 tonnes in 2022. Last year, gold reserves remained unchanged and the institution continued to increase them only in the second quarter of this year. According to Adam Glapiński, strategic gold resources are extremely important also with regard to international rating organisations.
“Why does the central bank own gold? Because it retains its value even if someone cuts off the supply to the global financial system. Of course, we do not assume that this will happen. But as the saying goes – fortune favours the prepared. And a central bank must be prepared for the most adverse circumstances. That is why gold has a special place in our currency management process,” said Glapiński.
Central banks bought a record amount of gold last year, the most since 1950, and the current purchases by central European banks appear to be following the trend. Many central banks expect the dollar's share of global foreign exchange reserves to decline further. The block of countries around the BRIC group is even more likely to actively seek to limit the dollar's influence, replacing it in payments with the yuan or the national currency. However, this entails a risk to the stability of national currencies.
It is therefore no wonder that gold is attractive to central banks. It increases the stability, together with the credibility, of national currencies. High demand from banks helps the precious metal to increase its own value. Gold is currently oscillating around the psychological threshold of USD 2,000 per troy ounce. It is only a matter of time before it surpasses it and eventually settles above USD 2,000 in the long term.
The best strategy for building a gold reserve is to buy the metal gradually, averaging the purchase price of ingots and coins. You don't have to worry about buying at the wrong time. You are creating your future right now, the important thing is just to get started.