Hungarian Central Bank Boosts Gold Reserves by 3,000% in Less than 3 Years
The comments below are an edited and abridged synopsis of an article by Ronan Manly
The central bank of Hungary, the Magyar Nemzeti Bank (MNB), has just announced the purchase of 63 tonnes of Good Delivery gold bars, and in doing so tripled the nation’s gold holdings from 31.5 tonnes to 94.5 tonnes.
The MNB explained its rationale for the purchase of what is around 5,040 large (400 oz) gold bars, highlighting that gold has no credit risk and no counterparty risk, and so reinforces sovereign trust in normal and extreme economic environments, while being one of the most crucial reserve assets that a central bank can hold.
This is not the first major gold purchase by Hungary in recent times; the MNB purchased 28.4 tonnes of gold in October 2018, increasing its gold reserves 10-fold, or a 1,000% increase.
This means that over 2.5 years, Hungary has increased its sovereign gold reserves by a staggering 3,000%, or 30-fold, from 3.1 tonnes to 94.5 tonnes, an absolute increase of 91.4 tonnes. How’s that for a conviction trade?
On the October 2018 occasion, Hungary purchased 28.4 tonnes of gold at the Bank of England in London, and repatriated it in the same month, announcing the purchase and the repatriation at the same time.
On this occasion, the MNB does not say where it bought its 63 tonnes of gold, nor does it say if the gold has been repatriated to Hungary. However, one would expect that it has been, and that it is under heavily armed guard.
Up for discussion: A no-confidence vote in the system; Hungary—now a major-league gold holder; Poland and Hungary—in sync; and do you believe in Bloomberg.
The central banks of Europe believe that gold has a confidence-building effect in normal times and can play a role in stabilizing and defending; gold is for extreme market environments, structural changes in the international financial system, and deeper geopolitical crises.