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Posts by: Emilia Kapas

Hungary repatriates its gold reserves

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Hungarian Parliament

Hungary has become the latest country to repatriate its gold reserves following a similar move by Germany last year

The Hungarian National Bank (MNB) has repatriated 3 tons of its gold reserves from London. The decision to bring the country’s gold reserves, worth over HUF 33 billion, $130 million, back to Hungary, was described as being designed to “strengthen market confidence towards Hungary,” by the MNB.

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The MNB sold most of the country’s gold prior to 1992, decreasing the state gold reserves from 65 tons to just 3. The money made from the sale was then invested in sovereign debt which at the time the bank considered to be safer, more liquid and potentially providing higher yields. Since 1992, Budapest’s gold activity has remained dormant as the MNB has not bought or sold any of its remaining reserves. This has been in contrast to a developing global trend for central banks to increase the ratio of gold in their reserves, thereby reducing their exposure to the US dollar and other state currencies following the last financial crisis. Gold still makes up less than 0.5% of the Hungary’s banking reserves.

Gold chart

This chart details the levels of gold held by the MNB under respective governors. Source: MNB

The MNB has not disclosed the costs of the repatriation nor did it detail the storage costs in Hungary. It is therefore difficult to ascertain the value of such an operation in terms of overhead costs saved on storage.

The MNB has said it has put a premium on holding its gold at home. Conscious of the risks inherent in storing them inside another country. The bank has also alluded to the importance of prestige in keeping its gold at home. Additionally there is also a political backdrop: the use of gold as payment in international trade to avoid the dollar hegemony, has been encouraged by other states such as Russia, while some commentators have also pointed to Hungary’s upcoming elections.

Gold troops

Hungary’s gold guarded by state troops. Source: MNB

This gold repatriation follows Germany’s move last year, bringing its gold back from the US and France in an operation stealthily carried out over several years. Typically, such movements are made piecemeal by airliners.

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