Increased gold reserve – therefore Polish currency rises

Published 24 August 2024 at 13.36

Economics. Gold is outdated and uninteresting according to most western central banks such as the Riksbank. But in Poland the view is different and by making large gold purchases, the country – unlike Sweden – has succeeded in strengthening its national currency.

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In 2023 took The Riksbank's unusual decision to sell foreign currencies to strengthen the Swedish krona. A market intervention that aims to influence the value of the currency by reducing the amount of Swedish kronor in circulation, but which causes Sweden to simultaneously lose parts of its currency reserve.

Instead, increasing the Swedish gold reserve was not discussed before the decision, as it would not reduce the amount of Swedish kronor in circulation and if the gold is bought for kronor, it would be counterproductive in the worst case. Gold is also seen as outdated and uninteresting by most Western central banks, which in many cases have not paid any attention to their gold reserves for decades.

An exception, however, is Poland's central bank, the National Bank of Poland (NBP), which in 2023 and 2024 have increased their gold holdings, which has strengthened the Polish zloty as gold prices have risen sharply, writes Euronews.

According to the latest report from the NBP, the country's gold reserves amounted to 12.6 million troy ounces at the end of July, an increase from just over 12.1 million ounces the month before.

At the same time, the bank reported that the total official foreign exchange reserve assets of euros amounted to to EUR 190 billion at the end of July, down from EUR 196 billion a month earlier.

NBP Chairman Adam Glapiński revealed in June that the bank has bought 5 tons of gold so far this year and plans to continue buying until gold makes up 20 percent of the country's foreign reserves, up from the current 13 percent.

Although this year's gold purchases are less than last year's record purchase of 130 tons, the impact is still significant. Gold prices have risen by 23 percent in US dollar terms since the start of the year alone and have recently crossed the $2,500 per ounce mark.

Poland now has nearly 392 tons of gold and ranks 15th in the world in gold holdings, which placing the country ahead of countries such as India, Turkey and Uzbekistan.

The increased gold reserves have also strengthened the zloty to its strongest level against the euro since October 2008.