(Bloomberg) – Earlier this year, the governor of the Czech Republic’s central bank traveled to London to inspect a vast collection of gold bars stored in the Bank of England’s concrete-encased vaults under Threadneedle Street. It flew.
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Ales Michel’s task to inspect precious metals stored on behalf of the Czech National Bank was part of the governor’s stated ambition to double the country’s stockpiles to 100 tonnes over the next three years. That amount has increased fivefold since he took office in 2022 with the aim of diversifying reserves.
“We need to reduce volatility,” an excited Mickle told Bloomberg TV earlier this month when asked about this. “To do that, you need an asset that has zero correlation with stocks, and that asset is gold.”
Czech policymakers are not the only ones accelerating bullion purchases. Peers from Warsaw to Belgrade are joining the gold rush as a way to diversify their investments and bet on future price increases, with Eastern Europe becoming one of the biggest buyers of the metal, fueling gold’s rally. .
Central banks around the world are stockpiling gold as a shield against external shocks, such as the expected trade wars sparked by the inauguration of Donald Trump as the country’s second president, and geopolitical tensions in Ukraine and the Middle East. But Eastern Europe’s currency guardians are particularly focused on replenishing their gold mines.
In addition to Mr. Michil’s move to London, the Warsaw-based Mr. Michil has written a script for a film about Poland’s gold history. Serbian authorities transported stockpiles stored abroad to their home country for safekeeping in Belgrade and to help reduce storage costs.
In this war-torn region of Europe, the search for security is a powerful motivator. And now the region is next door to the continent’s deadliest conflict since World War II.
“luxury club”
Poland, which borders Ukraine and is an ardent supporter of Kiev’s war aims, became the world’s biggest gold buyer in the second quarter, according to the latest data from the World Gold Council.
Poland’s Central Bank Governor Adam Glapinski said gold and foreign exchange reserves are essential to protect the economy from catastrophic events. As of September, he had increased his bullion holdings to about 420 tons, equivalent to about half of India and Japan’s stockpiles.
“We are joining an exclusive club of the world’s largest gold holders,” Glapinski beamed at a press conference last month, reinforcing his goal of raising gold’s share of total reserves to 20%.
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The president of the National Bank of Poland lamented that he did not have time to work on a draft script. A YouTube video produced by the central bank in February shows Mr. Glapinski basking in the sun in a vault lined with sealed boxes containing 6,000 gold bars, which are hidden in “the property of every Polish citizen.” ” he emphasizes.
Czechs could also become members of the club. The Prague Central Bank has foreign exchange reserves of approximately $150 billion, equivalent to almost half of gross domestic product, making it one of the largest banks in the world by that ratio.
Mickle has been diversifying, including buying U.S. stocks, but has faced some criticism for his purchases of gold, which reached market highs this year. Financial officials have pushed back, arguing that long-term purchases are gradual and will reduce the impact of price fluctuations.
Amid geopolitical headwinds, buying gold is a good bet for monetary policymakers. Goldman Sachs Group has put the metal on its list of major commodity trades for 2025, saying prices could rise further during President Trump’s term and reach $3,000 an ounce by next December. I mentioned it.
“Geopolitical fragmentation is favorable for gold, but moderate dollar weakness should provide further tailwinds,” J. Safra Sarasin Bank said in a Nov. 10 report.
For Eastern European leaders, gold is seen as a safe harbor and a political selling point as they often strike a complex balance between the West, Russia and China. Hungary’s central bank increased its gold holdings by more than a tenth this year to 110 tonnes.
The country’s Prime Minister Viktor Orbán enjoys being the EU’s chief disruptor with ties to the Kremlin and Trump.
The Budapest Central Bank has also hailed the metal as a safe haven. But gold plays a role in the country’s historical identity.
The Numismatic Museum, located in one of the palaces owned by the Hungarian National Bank, has a steam locomotive made of yellow rods. The sculpture, called “The Rumble,” depicts a central banker fleeing from Soviet troops on a train full of gold reserves at the end of World War II to prevent them from falling into foreign hands.
The group also has a presence in Serbia, where President Aleksandar Vučić, who, like Orbán, holds a stronghold of power, repatriated the country’s stockpile stored abroad in 2021. This year, Mr. Servia pledged to buy bullion with “all the surplus money.” It remains in the national treasury “to keep you safe in difficult times.”
Serbian Central Bank Governor Djorgovanka Tabakovic has overseen a tripling of gold reserves to 48 tonnes since taking office in 2012. This accumulation was done in close collaboration with Mr. Vučić, who provided “strategic thinking, global geopolitical relations and intelligence” to support Serbia. It’s a gold purchase, she said.
“In times of global turmoil, especially in times of geopolitical conflict and high inflation, the value and importance of gold is increasing,” Tabakovic said in an emailed response to questions. “Unfortunately, in recent years we have found that both factors are involved.”
–With assistance from Krystof Chamonikolas, Andras Gergely, Andrea Dudik, Francine Lacqua, and Robert Brand.
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