Budapest has announced a major increase in Hungarian gold reserves, expanding them by a factor of 10
Hungary has increased its gold reserves by a factor of 10 in a bid to enhance the country’s financial stability and “strengthen market confidence”. The decision sees the central bank of Hungary, Magyar Nemzeti Bank, take its gold holdings from 3.1 tonnes to 31.5 tonnes.
“Gold continues to be one of the safest assets in the world, which enhances stability and confidence even under normal market circumstances,” said the bank in an online statement. Hungary’s gold is now worth a total of approximately $1.24 billion, representing 4.4% of the nation’s total reserves.
The move follows a repatriation of Hungarian gold reserves earlier this year and echoes similar moves by Russia, China and most recently Poland, who have all increased their gold reserves significantly over the past 18 months.
Following the end of the Cold War Hungarian gold reserves dropped to around 3 tonnes. This most recent purchase puts them back at around the level they were in 1946.
Magyar Nemzeti Bank said the latest decision was driven by “stability objectives; there were no investment considerations behind holding gold reserves. In normal circumstances, gold has a confidence-building feature, i.e. it may play a stabilising role and act as a major line of defence under extreme market conditions or in times of structural changes in the international financial system or deep geopolitical crises.”
“In addition, gold continues to be one of the safest assets, which can be related to individual properties such as the limited supply of physical precious metal, which is not linked with credit or counterparty risk, given that gold is not a claim on a specific counterparty or country.”
While some analysts have question the logic behind such a purchase, others have said it makes sense as gold is currently seen as undervalued and global inflation looks set to rise. Gold also provides a degree of independence from the monetary policies of other central banks such as the ECB.
Image top: The Hungarian Parliament in Budapest