The Central Bank of Hungary announced yesterday that it had bought gold for the first time in over 30 years, increasing the country’s gold reserves from 3.1 tons to 31.5 tons.
The announcement yesterday marks the first time that Hungary has bought gold for reserve purposes since 1986 and brings the total to levels not seen in 70 years.
An official statement from the Magyar Nemzeti Bank’s Monetary Council said: “Holding precious metal within the country is consistent with international trends, enhances financial stability and may strengthen market confidence in the Hungarian economy.
“Preserving its historical role, gold continues to be one of the safest assets in the world, which enhances stability and confidence even under normal market circumstances.”
Photo courtesy of the MNB. A snapshot of the gold bullion reserves being delivered to the Central Bank of Hungary.
Hungary has already imported the gold bullion and will hold it domestically, rather than in New York or London as many nations do. The quantity suggests an element of concern for global economic well being, with the bank describing the move as being for “stability purposes”.
The increase is modest in the grand scheme of Hungary’s economy, bringing gold to 4.4% of the country’s overall reserves, but this is the average figure for Central and Eastern European countries that are not in the Eurozone. Reuters recently reported that Poland bought more reserve gold in September, while Austria has repatriated its gold from London and the Netherland have recently completed their recall of foreign-stored gold.
Timing has been called into question by some analysts, who believe that European Parliament criticism of Hungary has inspired this decision. Hungary does not use the Euro, so there’s no threat of leaving like there may be with Italy, but the country is part of the EU and subject to European Central Bank regulations, so some see their decision as preparation for any future spat that may end up affecting the Hungarian economy.