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Following in the footsteps of a number of other European countries, the Czech Republic is now adding substantial gold to its reserves. In April, the central bank bought 1.8 tonnes of gold, after it had already purchased 1.5 tonnes in May. This brings the country's total gold reserves to 15.3 tonnes. By comparison, that's almost double from the low of 7.8 tonnes two years ago. The country buys since 2020 gold, but always in small steps of no more than a few hundred kilos per month. In recent months, we have seen a lot more purchases, as previously announced by the new governor of the central bank.
The Czech gold reserves are relatively small at 15.3 tonnes. Not only in relation to the population of more than 10 million inhabitants, but also in relation to other European countries. However, the new governor of the central bank, Ales Michl, wants to change that. A year ago communicated He already pursues his strategy of buying more gold and stocks as a central banker, as an alternative to low-yielding foreign exchange reserves in the form of government bonds. "It's better to have assets than a mountain of debt", he told Reuters at the time.
Czech Republic's central bank adds more gold to reserves
Michl is ambitious, because in February he said he would endeavor to a gold reserve of 100 tons within six years. That is more than eight times as much as the current stock. "The goal is to increase the expected return, without significantly increasing the risk of the portfolio," He stated earlier this year. "In the reserves of the Swiss central bank, gold represents 6.2 percent. I propose that within five years we should be at 4 to 5 percent." The Czech gold stock has increased with the current Gold price A value of more than €900 million, still only a fraction of the total reserves. Gold currently represents less than one percent of total reserves.
The Czech Republic had €129 billion in reserves in January this year, equivalent to 45% of GDP. The central bank has amassed some of these reserves by buying foreign currency in order to depress the value of its own currency. The country has been a member of the European Union since 2004, but still has its own currency with the Czech koruna. A possible explanation for the gold purchases could be participation in the euro, but the country does not intend to do so for the time being.
The Czech Republic joins a growing group of Eastern European countries Buy gold. In recent years, Poland, Hungary and Serbia have also added precious metals to their reserves. Poland, for example, has already doubled its gold reserves, while Hungary has increased its reserves by a factor of ten. These countries acquire precious metals as a form of diversification and as a hedge against geopolitical risks. While we don't know exactly if this is also the main reason for the Czech Republic to buy gold, it seems likely that they make a similar trade-off when managing their reserves.
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