Another 100 tons of gold in the resources of the National Bank of Poland – ambitious plans to increase gold reserves

For centuries, gold has been and still remains the focus of investors, including central banks. Prof. Adam Glapiński, the President of the National Bank of Poland, signals the intention to purchase another 100 tons of gold in 2022. Increasing gold resources is an activity aimed at increasing Poland’s financial security.

In the years 2018-2019, NBP purchased a significant amount, as much as 125.7 tons of gold. Prof. Glapiński announces that if he has the opportunity to continue his tasks at the National Bank of Poland during the second term of the NBP President, the central bank will strive to continue the current policy and to increase gold resources. However, the scale and pace of purchases will depend, inter alia, on on the dynamics of changes in official reserve assets and current market conditions. Initially, President Glapiński assumes that he will propose to the NBP Management Board to buy another 100 tons of this metal in 2022.

Relatively high share of gold in the assets of the NBP

As at the end of August 2021, the NBP gold stock amounted to 7.402 million ounces, i.e. 230.2 tons. NBP ranks 23rd among central banks in the world and 11th among European central banks. Central banks have a total of approx. 30 thousand. tons of gold. The largest holder of gold is – for historical reasons – the United States (8.1 thousand tonnes), then Germany (3.4 thousand tonnes), followed by Italy, France, Russia and China – all of approx. 2 thousand tonnes each. tone. The gold resources held by the National Bank of Poland are almost twice as large as in Sweden (126 tons), and are similar to those in Belgium (227 tons).

If the NBP purchases another 100 tons of gold, Poland’s strategic gold reserves may be greater than, among others, Austria, Spain or Great Britain.

See: Polish gold reserves – we have a lot and we will have even more

In addition to absolute values, it is also important how much gold is part of the total assets of a central bank. In this approach, the NBP is at a level similar to, or even slightly higher than, central banks in Germany or the United States.

The more gold you have in the country, the more you trust your country

Gold is the “most reserve” reserve asset: it diversifies geopolitical risk and is a kind of confidence anchor, especially in times of tensions and crises. Having significant foreign exchange reserves – gold in particular – increases confidence in the country as assessed by rating agencies, foreign investors and international institutions. This has an impact on lowering the cost of financing in global markets and reduces the risk of a sudden outflow of capital from the country.

Moreover, gold acts as a resource that diversifies (differentiates) the structure of reserve assets of central banks. The low dependency between gold prices and the prices of other assets reduces the financial risk associated with the maintenance of reserves, i.e. the volatility of the value of foreign exchange reserves caused by market factors.

Gold is a safe reserve – free from politics and credit risk

Gold plays a special role in the NBP foreign exchange reserve management strategy. First and foremost, it’s not a liability to anyone, and therefore free of credit risk – the bane of all asset managers. In addition, gold is free from direct links with the economic policy of any country, resistant to turmoil in global financial markets, and its physical characteristics ensure durability and virtually indestructibility. All these properties make gold so-called a safe haven asset, the value of which usually grows in conditions of increased risk of financial or political crises. As a result, gold shows a relatively low correlation with the main asset classes – especially the US dollar dominating the NBP reserve portfolio – which has a positive effect on the diversification of financial risk.

8392 Gold Reserves

The NBP vaults contain 104.9 tonnes of gold, which corresponds to 3.371 million ounces. Although gold is sometimes referred to interchangeably as ore, which brings to mind the ore of this precious metal, in fact they are bars: in the NBP vaults in Poland there are currently 8,392 of them. All bars – not only those in the NBP vaults, but also those kept at the Bank of England – meet the highest purity standards known as “London Good Delivery” – each bar has a weight of approximately 400 troy ounces (12.5 kg) and a gold fineness of at least 995 (must contain at least 99.5% pure gold), embossed in in a visible place with refiner labeling and year of manufacture.

Gold is not everything. NBP contributes to the state budget

The NBP carries out many statutory tasks and cares for the financial security of Poles not only by buying and managing subsequent tons of gold. The central bank supplies the state budget with billions of amounts. Where are they coming from?

Basically, the main role in shaping the NBP financial result is played by the result from the management of foreign exchange reserves, the value of which amounts to nearly USD 170 billion. This is approximately six times more than $ 27.5 billion. in 2000 and almost doubling its assets denominated in US dollars over the past decade.

It can therefore be said that the NBP is one of the largest investors in the region. But very specific conditions also play a role here. As the NBP conducts monetary policy under a floating exchange rate, the reserves serve primarily to strengthen Poland’s financial credibility and support the resilience of our economy to turmoil in the global financial markets.

Hence, the NBP, as a public investor, attaches the greatest importance not so much to maximizing profits, but to maintaining liquidity and security of its assets. Nevertheless, recent years have indeed been successful for the NBP, because despite unfavorable conditions and very low interest rates in the world, the central bank managed to achieve quite good investment results. In the years 2016-2020, NBP generated profits, the total payment of which to the state budget exceeded PLN 32 billion.

Source: Strona główna by

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