Hungary's National Bank (NBH) delivered a statement last April that it has increased the gold holdings of the country to 94.5 tons. The announcement came after Hungary bought a massive 63 tonnes of Gold to triple the gold account of the country.
The central bank of Hungary explains the reason behind its purchase of a considerable amount of Gold, which totaled almost 5040 maximum-sized 400 ounce gold bars. The bank says that Gold carries the listed amount of credit and counterparty risk.
Past Attempt to Increase Gold Reserve
Though this is a massive leap from the past, it is not the first significant gold reserve increase attempted by Hungary. In October 2018, the central bank of Hungary acquired 28.4 tonnes of pure Gold, doubling its gold holdings from 3.1 to 31.5 tonnes. It was a 1000% gain for the country.
This statement implies that Hungary has grown its sovereign gold holdings by 3000 percent, or 30 times in precisely two years. According to the country's latest update, it now possesses the highest gold reserve in per capita estimation in eastern and central Europe at nearly 0.31 ounces.
The central bank of Hungary hasn't said anything about how much it had to pay to purchase the additional Gold. As the amount of reserved Gold has tripled, one can assume that its worth is now about 4.5 billion Euros.
Background of the Recent Gold Purchase
The decision follows this year's repatriation of gold holdings in Hungary and reflects similar steps by China, Russia, and, at last, Poland. All of these countries have dramatically raised their gold stocks in the previous 18 months.
Following the conclusion of the Cold War, Hungary's gold stockpiles fell to roughly 3 tonnes. Now, this latest acquisition restores them to about the level the country was at in 1946.
Why Has Hungary Accumulates Significant Gold Reserves?
The newest decision was motivated by stability aims; Hungary had no investment motives behind the decision. Gold shares a confidence-building effect not only in everyday situations but also in critical circumstances.
It may operate as a stabilizing factor and a primary line of defense during periods of harsh market conditions, fundamental upheavals in the international financial procedures, or severe geopolitical crises.
Gold is still the safest investment, which may be attributed to distinctive characteristics like the restricted supply of actual precious metal unrelated to counterparty or credit risk. Gold cannot be a claim on a particular counterparty or nation.
Conclusion
Though Hungary has shown some straight points for its decision to purchase Gold, some experts have questioned the rationale behind Hungary's accumulation of such significant gold reserves. Others have said that it makes sense given Gold's present undervaluation and the likelihood of global inflation rising. Additionally, Gold gives a measure of independence in terms of other central banks' monetary policies.
