Poland makes largest gold purchase since 1998

Poland's central bank added 9.3 tonnes of gold to its reserves in July and August, according to the Latest figures of the International Monetary Fund. It was the first purchase in twenty years and also the largest purchase of any country within the European Union during this period. With this purchase, the country expands its gold reserves from 3.31 million troy ounces (103 tons) to 3.61 million troy ounces (112.3 tons).

Why Poland has added gold to its reserves remains unclear for the time being, because the central bank did not want to give an explanation to the international press. So we are guessing about an explanation, which we may have to look for in the relatively low gold price of the past few months. The central bank may be looking for more diversification to protect itself against rising inflation and rising geopolitical tensions.

Poland expands gold reserves

According to the latest figures, Poland has a total reserve of $114 billion, most of which consists of foreign exchange reserves. The gold stock is valued at $4.36 billion and represents 3.8% of total reserves. That is relatively little compared to other countries, as figures from the World Gold Council show that central banks worldwide hold an average of 10.3% of their reserves in gold. Within the Eurozone, of which Poland is not a part, that percentage is as high as 54%.

Poland joins an ever-growing list of countries adding gold to their reserves. The purchase comes at a time when the Gold price and the Polish economy is growing faster than that of the countries in the Eurozone. Whether this purchase was a one-off or whether the central bank will buy more gold in the near future cannot be said in advance. Over the past 35 years, the country has made only a few major purchases, the most recent of which represents a value of $355 million.

"Poland's purchase of gold suggests that interest in gold among central banks is broadening. A broader base of central banks buying gold can only be good news for the market."Matthew Turner of the Macquarie Group in London told Bloomberg.

Natalie Dempster of the World Gold Council says in a statement to Bloomberg that central banks Buy gold Because they expect the international monetary system to move away from the dollar and towards other currencies. "Central banks have three objectives in terms of managing their reserves, namely to keep them safe, to remain liquid and to generate returns. Gold can meet all three of these objectives."

Poland adds gold to reserves (Source: Bloomberg)

Poland's gold stock rose to 3.61 million troy ounces (Source: IMF)

Central banks continue to buy gold

The gold stocks of central banks worldwide are now at their highest level in two decades. In recent years, Russia and China have added a lot of gold to their reserves, but countries such as Kazakhstan, India and Turkey have also bought a substantial amount of the precious metal. Smaller purchases were made by the Philippines, Mongolia and Iraq, among others.

Western countries were still selling large amounts of gold at the beginning of this century, but stopped there more after the outbreak of the financial crisis in 2008. These countries still have relatively large gold reserves and therefore have less reason to buy more than several emerging economies.

This contribution was made from Geotrendlines