The Magyar Nemzeti Bank, located at the heart of Budapest, Hungary and a stone's throw away from the River Danube.

Hungary's central bank, the Magyar Nemzeti Bank (MNB), has announced the purchase of 63 tonnes of Good Delivery gold bars. In a press statement issued yesterday, the bank revealed it had acquired 5,040 bars weighing 400 ounces each, taking the nation's holdings from 31.5 tonnes to 94.5 tonnes.

The MNB previously bought 28.4 tonnes of gold bullion for its reserves in October 2018, which we reported on at the time. This gold was bought from the Bank of England, and the gold was repatriated to Hungary immediately as part of the central bank's Phase One to bolster its reserves. Phase Two is now underway, with the MNB up to a 3000% increase in holdings in the last three years now, but the bank's press release did not state whom they had bought the bars from – just that it was part of “long-term national and economic policy strategy objectives”.

Based on last month's fix prices – available through our LBMA fix price page – the average for the month was approximately $1,720 per ounce of gold. Multiplied by the 2,016,000 ounces purchased, the price paid by Hungary is in the region of $3.484 billion.

The press statement repeats a lot of the same points: the MNB are “managing new risks arising from the coronavirus pandemic”, they want a safe-haven asset and they want to take advantage of its finite supply. One additional point the MNB made though was regarding the lack of counterparty risk, “given that gold is not a claim against a specific partner or country.” This comes at a time when the IMF's latest 'Currency Composition of Official Foreign Exchange Reserves (COFER) report' for Q4 2020 revealed an increasing rate of “de-dollarisation”, with a 1.5% decline in US dollar holdings as part of central bank reserves. This puts the USD at 59% of global reserve holdings and its lowest level since 1995.

There has been movement from Russia for two decades with regards to moving away from the US dollar's dominance through central bank reserves. Similar moves have been made by China in recent years, but now other nations are beginning to follow suit; whether out of frustration with America or through a lack of confidence in the US dollar. Counterparty risk isn't on everyone's mind though, with the Euro, Yen, and Renminbi benefiting the most from the Dollar's misfortunes.

Thanks to their latest purchase, Hungary now boast the 36th largest holding of country-held gold reserves, with gold rising from a mere 4.7% of the nation's reserves to a much healthier 14.1%. It is unlikely that this will be the last gold purchase by the Magyar Nemzeti Bank, but the decision to act now might spur other central banks to move before inflation fears are realised and gold demand (and prices) rise as the year progresses.