finance.yahoo.com
(Bloomberg) — Earlier this year, the Czech Republic’s central bank chief
flew to London to have a look at a swelling stack of gold (GC=F) bars stored in the Bank of England’s concrete-encased vaults beneath Threadneedle Street.
Ales Michl’s mission to inspect the precious metal
held for the Czech National Bank was part of the governor’s stated
ambition to double the country’s stockpile to 100 metric tons in the
next three years. It’s increased fivefold since he took office in 2022
with an aim to diversify the bank’s reserves.
“We
need to reduce volatility,” Michl, who grew animated when queried on
the subject, told Bloomberg Television earlier this month. “And for
that, we need an asset with zero correlation to stocks, and that asset
is gold.”
The Czech policymaker isn’t alone in accelerating
bullion purchases. Peers from Warsaw to Belgrade are joining the gold
rush as a way to diversify investments and bet on future price
increases, making eastern Europe one of the biggest buyers of the metal
and helping to drive the gold rally.
Central
banks around the world are stocking their gold arsenals as a shield
against external shocks such as prospective trade wars brought on by
Donald Trump’s second presidency and geopolitical tensions in Ukraine
and the Middle East. But eastern European monetary guardians have made a
particular show of topping up their gold piles.
In addition to Michl’s foray to London, his
counterpart in Warsaw has penned a movie script on the history of Polish
gold. Serbian authorities hauled their stockpile held abroad home to
keep it safer in Belgrade — and help cut storage costs.
Striving
for a sense of security is a powerful motive in a region that’s been
ravaged by Europe’s wars of the past — and that now finds itself next
door to the continent’s deadliest conflict since World War II.
Poland,
which shares a border with Ukraine and is a staunch supporter of Kyiv’s
war aims, was the largest buyer of gold globally in the second quarter,
according to the World Gold Council’s latest data.
Poland’s
central bank governor, Adam Glapinski, said gold and hard currency
reserves are crucial to protecting the economy against catastrophic
events. He increased bullion holdings to some 420 tons as of September,
about half the stockpile of India or Japan.
“We are entering the exclusive club of the world’s biggest gold owners,”
Glapinski gloated during a news conference last month, reinforcing his
aim to raise gold’s share to 20% of all reserves.
The head of the National Bank of Poland lamented
having no time to work on his draft script. A YouTube video produced by
the central bank in February shows Glapinski basking in a vault lined
with sealed boxes of six thousand gold bars, intoning that the stash “is
the property of all Polish people.”
The Czechs
are also prospective club members. The central bank in Prague boasts
about $150 billion in foreign reserves — nearly half of gross domestic
product — one of the world’s biggest by proportion.
Michl, whose diversification drive includes US
stock purchases, has confronted some criticism for buying gold as it
reached a market record this year. Monetary officials have pushed back
by insisting that the long-term purchases are gradual, reducing the
impact of price volatility.
With the geopolitical winds churning, gold purchases have been a good bet for monetary policymakers. Goldman Sachs Group Inc. (GS)
listed the metal among top commodity trades for 2025, saying prices
could extend gains during Trump’s presidency and reach $3,000 an ounce
by December next year.
“Geopolitical
fragmentation is favorable for gold, while gradual dollar weakening
should be a further tailwind,” Bank J. Safra Sarasin said in a report
from Nov. 10.
For eastern Europe’s leaders,
gold is viewed as a safe harbor — and a political selling point — as
they maintain often complex balancing acts between the West, Russia and
China. The Hungarian central bank has boosted its gold stash by more
than a 10th to 110 tons this year.
The country’s Prime Minister Viktor Orban has relished being the EU’s chief disruptor with his ties to the Kremlin and Trump.
The central bank in Budapest has also lauded the metal as a safe haven. But gold has a role in the country’s historic identity.
The
Money Museum, located in one of the palaces owned by the Hungarian
National Bank, features a steam locomotive fashioned from yellow bars.
The sculpture, called “The Rumble,” depicts the central bank’s staff,
which fled the Soviet military at the end of World War II on a train
loaded with gold reserves to prevent it from falling into foreign hands.
The
associations figure no less in Serbia, where President Aleksandar
Vucic, who like Orban holds a firm grip on power, had the country’s
stockpile held outside the country repatriated in 2021. This year, he
promised to buy bullion with “every surplus of money” that’s left in
state coffers “to be safe and secure in hard times.”
Serbia’s central bank governor, Jorgovanka
Tabakovic, has overseen a tripling of gold reserves to 48 tons since
taking office in 2012. The accumulation was handled closely with Vucic,
who provided the “strategic thinking, knowledge of global geopolitical
relations and information” to back the gold purchases, she said.
“Gold
is gaining value and importance in times of global turbulences,
especially in geopolitical conflicts and periods of high inflation,”
Tabakovic said in emailed response to questions. “Unfortunately, in
recent years we’ve seen both factors at play.”
