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Central Bank of Poland Makes Largest Monthly Gold Purchase in Four Years

Published by Karl Martin Karus in category Articles on 26.06.2023
Gold price (XAU-SEK)
26128,40 SEK/oz
  
+ 94,00 SEK
Silver price (XAG-SEK)
312,02 SEK/oz
  
+ 1,30 SEK

The Central Bank of Poland recently made its largest monthly gold purchase in the last four years, acquiring nearly 15 tons in April. Central Bank Governor Adam Glapinski emphasized that gold holds its value even in the event of a global financial system collapse.

Increase in Gold Reserves and Value

According to the Central Bank, Poland’s gold reserves have risen by 14.8 tons, reaching 243.5 tons last month. This marks the most significant increase in gold reserves since June 2019, and it has raised the value of Poland’s gold holdings to $15.5 billion.

Gold’s Share in Central Bank Reserves

In April, the total value of the central bank’s reserves surged to $178 billion, with gold accounting for over 8 percent. On 31 December 2022 in Sweden, the Riksbank owned 125.7 tons of gold. The market value of the gold was SEK 76,5 billion at that time. The Riksbank’s gold reserve is stored at different places worldwide as there would be too much of a security risk if it were all stored in the same place.

Central Bank’s Plans and Importance of Gold

Central Bank Governor Adam Glapinski announced in 2021 that Poland intends to increase its gold reserves by 100 tons, highlighting their preparation for adverse conditions. Glapinski emphasized the significance of gold as a safe-haven asset, stating that it plays a crucial role in their reserve management and prepares the central bank for worst-case scenarios.

Impact on Gold Prices and Expectations

Managing director of BMO Capital Markets, Colin Hamilton anticipates that large gold purchases by central banks will continue throughout the year, contributing to the upward pressure on gold prices. He believes this trend will benefit the price of gold.

Global Central Bank Gold Purchases

The World Gold Council (WGC) reported that central banks purchased 228 tons of gold in the first quarter of 2023, the highest amount since data collection began in 2000. Although lower than the previous two quarters, which set record highs (458 and 378 tons, respectively), this indicates significant ongoing interest in gold acquisitions by central banks. Notably, Singapore (69 tons), China (58 tons), and Turkey (30 tons) have been the leading buyers. It is important to note that the exact buyers remain undisclosed for many of these purchases. While China’s official gold reserves stand at just over 2,000 tons, unofficial estimates suggest their holdings could be as high as 10-20,000 tons.

Analysis of Poland’s Gold Purchase

The gold purchases by central banks in 2022 were the highest since 1967, primarily driven by Middle Eastern and Asian countries. Western countries, in contrast, have been relatively passive or on the selling side in the gold market. Poland’s recent actions are seen as setting an example for Western nations.

Geopolitical and Economic Challenges

The increased interest in gold purchases by central banks worldwide reflects a growing recognition of forthcoming challenges in geopolitics, the economy, and the financial system. Strong gold reserves have historically provided stability during such periods. Cracks in the unsustainable debt-based monetary system are becoming evident, though Western leaders are reluctant to acknowledge it. This also implies the failure of the money printing and ultra-cheap money policies pursued over the past few decades. Rising inflation, declining bond prices, and recent banking crises shed light on the weak foundations of the current system.

A Shift in Economic Power

As major gold purchases primarily originate from the East, it suggests that the balance of global economic power may rapidly shift toward the East, particularly China, following the change in the monetary system.

Read more: More and more countries have begun to abandon the dollar. Is BRICS taking over?

Sustainable Economic Policies and Lessons from Argentina

In Western countries, people have become accustomed to a high standard of living and wealth. However, this should not be taken for granted. Ensuring long-term prosperity requires sustainable economic policy decisions. The case of Argentina, where the country has descended from being one of the world’s top ten wealthiest nations to a developing country, serves as a reminder that irresponsible debt, persistent budget and trade deficits, and temporary problem-solving measures can lead nations into poverty.

Gold price (XAU-SEK)
26128,40 SEK/oz
  
+ 94,00 SEK
Silver price (XAG-SEK)
312,02 SEK/oz
  
+ 1,30 SEK

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