Almost 30 Billion PLN in 8 Years: How the National Bank of Poland Profited from Gold Investments

The National Bank of Poland (NBP) continues to work relentlessly in ensuring the financial stability of the country. Thanks to strategic purchases of gold in recent years, it has not only strengthened its position but also brought tangible benefits to the Polish economy. Over the last eight years, NBP has made almost PLN 30 billion in investments in gold. The amount of accumulated gold places Poland in a leading position in the global race for gold reserves.

Poland on the Golden Podium

Recent data shows that after recent purchases exceeding 6 tons of gold, the gold reserves in Poland are now almost 398 tons. Gold’s share in national reserves therefore exceeds 15%, with the goal of reaching 20% in the near future now closer to realization.

Were such large purchases worth it? Definitely. In just the last eight years, the NBP generated more profits from gold than in the previous 18 years – almost PLN 30 billion compared to PLN 29 billion obtained from 1998 to 2016. This comes from calculations done by Tavex, based on NBP data, as well as prices of LBMA ounces in USD and the USD exchange rate according to the NBP. This shows how effective the strategy of intensifying gold purchases was, bringing Poland record profits in a significantly shorter time.

This profit is also confirmed by calculations from the bankier.pl portal, which indicated in its article that: “The value of gold, by which the net reserves of the NBP increased in the years 2018-24 (as of August) according to LBMA market prices from the end of August is 23.944 billion dollars. Thus, the potential profit of the NBP at the end of Summer 2024 was 7.406 billion dollars[1]”.

We unfortunately do not know the exact dates of the transactions, so calculations can only be made based on the value of reserve assets at the end of the month, which is published by the NBP. Importantly, apart from the price of gold itself, there are numerous additional costs associated with transactions, insurance, storage, or transportation. Each gold bar owned by the NBP is closely monitored, which also comes at a cost. However, our estimates focus only on the profits from the price of gold, which are undeniable – points out Tomasz Gessner, chief analyst at Tavex.

The increasingly complex geopolitical and economic situation makes the management of gold reserves a key element of central banks’ strategies around the world.

Peace is Gold – Poland on the Golden Path

According to the latest Central Bank Gold Reserves (CBGR) survey conducted in the first half of 2024, 29% of central banks plan to increase their gold reserves in the next twelve months. This is the highest percentage since the start of the survey in 2018, demonstrating the important role gold plays in global financial policy.

Thanks to strategic decisions, Poland became the leader in gold purchases in the second quarter of 2024 and moved up to 12th place in the global ranking of central banks’ gold reserves. This is a significant achievement, considering that just a year ago, Poland was ranked 22nd. Moreover, it currently ranks 2nd in Central and Eastern Europe, surpassing Turkey and trailing only to Russia, according to information provided by the World Gold Council.

Monetary gold is a key element of central banks’ currency reserve diversification. Its unique properties – including the ability to maintain purchasing power in the long term and the absence of default risk when held under own control – make it an irreplaceable tool in risk management. Additionally, gold has exceptional liquidity, which allows it to be almost instantly exchanged for any currency. The global demand for this precious metal makes it a sought-after asset on all continents – emphasizes Aleksander Pawlak, CEO of Tavex. The NBP’s decision to increase gold reserves is not only a step towards ensuring financial stability but also a strategic move that strengthens Poland’s position on the international stage. Importantly, thanks to accurate decisions, the NBP has generated nearly PLN 30 billion in profits from these investments over the past eight years. This is proof of how gold contributes to stable and long-term benefits for the economy. Poland effectively uses its potential to strengthen its global position – he adds.

Let’s also remember that gold reserves are also considered by investment capital or rating agencies. Therefore, one could playfully ask how much the zloty would cost today if it weren’t for the accumulated gold reserves. We store 105 tons in Poland of the collected 398 tons, and the rest closer to the global markets and transaction centers in London and New York.

By increasing reserves, the NBP is securing itself against potential conflicts beyond the eastern border. If these risks were to materialize, investment capital would instantly evacuate from Poland. The shares of Polish companies, treasury bonds, some properties (especially in the region of areas key to military supplies), and of course the national currency, would be under severe pressure. Physical gold in this situation is devoid of such risks, not to mention that its value would increase even more in such an environment. Having such large gold reserves by the NBP could therefore help to go through a potential crisis a bit less painfully. Moreover, its parties stored in London and New York could serve as a means of settlement for any support granted by the Americans or the British. The Polish zloty would not catch anyone’s interest, and the dollar exchange rate in such a high internal risk environment would be extremely unfavorable for such settlements – Tomasz Gessner, chief analyst at Tavex, points out.

[1] https://www.bankier.pl/wiadomosc/Ile-NBP-mogl-zarobic-na-zlocie-Wyciag-ze-zlotego-rachunku-banku-centralnego-8811698.html