Gold is experiencing a renaissance: last year, a huge amount of gold, 4,899 tons, was bought on the international markets, this figure exceeded all previous records. Demand at its peak is also reflected in prices, which have almost doubled in the last six years.
Looking at the two decades behind us, there is a sevenfold increase in price. Based on the numbers, this means, for example, that while an ounce of gold was being asked for between 1,000 and 1,100 euros in the middle of 2018, in March of this year the exchange rate approached the level of 2,100 euros. And if we look back to 2004, this precious metal was still offered for around 300 euros per ounce. The first big leap can be made at the height of the global financial crisis in 2008: at that time, an ounce of gold was already worth nearly 700 euros.
Gold was given a tailwind by geopolitical tensions
In recent years, new price-inflating events followed one another. The coronavirus epidemic, which accelerated from 2020, then the drop in demand and the uncertain supply chains, and the Russian-Ukrainian war and the subsequent geopolitical uncertainties all had an impact on the gold market.
Gold is always a refuge for capital in times like this, and this is even more so now. In addition, the central banks have appeared and gained a decisive role among buyers, who once again see a fantasy in accumulating gold reserves in order to strengthen confidence.
One of our most precious precious metals provided the cover for national currencies until the end of the Second World War. The system known as the gold standard was abolished in July 1944, at a conference held in the American town of Bretton Woods. The 730 delegates from 44 countries decided to set up a new international financial system here, which relied on the dollar in addition to gold. This was put an end to by the oil crisis of 1973, after which the central banks switched to freely floating the exchange rates of national currencies. A good part of the gold reserves was put on the market, due to the falling prices, international agreements had to limit the sales of the central banks.
The central banks are on a big shopping spree: the Czechs and Poles are at the forefront
The beginning of the current era can be dated to 2010-2011. After the global financial crisis, the interest of some central banks in increasing gold reserves was revived. In this period, the controllers of monetary policy appeared as net buyers on the market – they have accumulated more than 7,800 tons since then – and the repatriation of existing and stored national stocks at other banks also began. The real big push was the arrival of the current twenties, the decade of uncertainty. In 2021, the central banks were once again more inclined to build traditional precious metal reserves. The amount of gold that went to central banks broke the historical peak before last year – with 1082 tons, but the 1037 tons the year before that was not much less.
Last year was also characterized by the fact that the central banks of the Central European countries also got involved in the purchase of gold. The main cause of this was probably the outbreak of the Russian-Ukrainian war and the further strengthening of the conflict. The purchase of 130 tons by the Polish central bank was the second largest purchase in the world in 2023, but the Czech central bank also increased its gold reserves by 19 tons to 31 tons, which was the largest purchase in Prague since 1993.
At the regional level, the domestic reserve is in the lead
And while we’re almost in the neighborhood, it’s worth recalling that our country played a pioneering role in the area of gold purchases. Despite last year’s Polish purchase, we still have the largest per capita gold reserves in the region. However, this required several significant steps, which, moreover, were implemented by the Magyar Nemzeti Bank in the calmer period before the arrival of the coronavirus – in order to increase trust in the country. By the way, the central bank has been holding gold reserves since its foundation a hundred years ago, which has never reached the amount it has today. At the end of the Second World War, about 30 tons of gold bars and money were saved by the employees of the MNB, which also provided a stable basis for the introduction of the forint in 1946.
Around the time of the system change, the leaders of the central bank at the time declared our 46-ton reserve as an obsolete asset, sold it in several stages, and reduced it to the symbolic amount of 3.1 tons.
The change had to wait until March 2018, when the Hungarian central bank brought home the existing stock as a first step, which, moreover, had been stored in London until then, not in domestic safes. After that, the MNB increased the amount tenfold, and in 2021 it bought another 63 tons, thus increasing the domestic gold reserve to the current 94.5 tons.
| In the past two months, the price of gold has risen by almost 20 percent after breaking out of its previous trading range. |
