Last year, the gold market captured the attention of investors worldwide. It is extremely rare in history for the safest of assets, which pays no dividends or interest, to increase by 32% in a single year. Yet, that is precisely what happened. At the same time, it became apparent that the President of the National Bank of Poland (NBP) made a phenomenal move by adding large amounts of gold to Poland’s reserves. According to Tavex estimates, the NBP’s gold purchases this year have resulted in a gain of around 2.35 billion PLN. Over the entire tenure of the current NBP President, the profit from these purchases has reached approximately 37.5 billion PLN.
The Start of the Golden Era
Poland’s gold purchases reached a record high this year, but it is important to note that the strategy of increasing the country’s gold reserves has been in place for years.
Over the last eight years, the NBP has generated more profit from gold than in the previous 18 years combined. In June 2016, Poland held about 103 tons of gold, most of which had been purchased back in 1998. The turning point came in 2018 when a decision was made to significantly increase the gold reserves. Within less than a year, more than 100 tons of gold were bought, and in 2019, these reserves were brought back to Poland, raising the country’s holdings to 228 tons.
After a few years’ pause, gold purchases resumed in April 2023. By December 2024, Poland’s gold reserves had increased to 448 tons. Based on data from the World Gold Council for the third quarter, Poland is now ranked 12th in the world in terms of gold reserves. This ranking was based on the reserves at the end of September, which stood at 419 tons. Taiwan, with 422 tons, was just ahead of Poland, while Turkey held 595 tons. After the NBP’s purchases in the fourth quarter, it is likely that Poland has moved up to 11th place in the global ranking.
The NBP’s 2023 financial report reveals that Poland is currently holding 104.9 tons of gold. However, it is important to note that there is no information on whether these recent purchases have been transported to Poland. Assuming they are still stored in the Bank of England and the Federal Reserve Bank of New York, Poland would currently have control over only a quarter of its gold, according to Tomasz Gessner, the chief analyst at Tavex.
Gold is Peace – Poland on the Golden Path
Over time, gold has steadily increased its share of Poland’s total reserve assets. Before the 2019 purchases, this share typically ranged from 3-5%. Currently, it stands at 16.86%. It is worth noting that Adam Glapiński, the President of the NBP, has repeatedly expressed the intention to increase this share to 20%, suggesting that purchases from last year may continue in the coming months.
To summarize the profits from changes in gold valuation, our estimates indicate that on the recent 89.5 tons purchased, the NBP has made a gain of approximately 2.35 billion PLN. The profit is even more significant when accounting for all purchases during the current President’s tenure, bringing the total gain to around 37.5 billion PLN. Adding to that the reserves acquired after the 1998 purchases, the total change in gold valuation for the NBP reserves exceeds 70 billion PLN, according to Tavex’s calculations.
In hindsight, it is clear that investing in gold for the long term is a prudent move, both for managing the central bank’s reserve structure and for household portfolios. It is important to remember that gold’s purpose in the long term is not to make us rich but to safeguard the purchasing power of what has already been earned. Although there are times when gold can significantly increase that purchasing power, as seen last year when, with 4.8% CPI inflation in Poland, the price of gold expressed in PLN rose by 32%, concludes Tomasz Gessner, the chief analyst at Tavex.
Source: ManagerPlus
