Poland is making a rare charge into gold.
The country added about 9 metric tons to its bullion reserves in July and August as prices dropped, International Monetary Fund data show. That’s Poland’s biggest purchase since 1998 and among the largest additions by a European Union nation since then.
The National Bank of Poland declined to comment on its reserves, but economists said gold’s recent drop to the lowest price in more than a year has helped make the metal more attractive.
“The NBP reserve management policy is based on diversification,” said Marcin Mazurek, a senior economist at mBank SA. “Perhaps the basic criterion is the low price of the gold, combined with the expectation for higher global inflation.”
Poland’s bullion reserves are now at the highest since at least 1983, though the country still ranks outside the 30 biggest holders, IMF and World Gold Council data show. While the nation’s economy is growing at twice the rate of the euro region, analysts expect growth to slow in the next couple of years and Moody’s Investors Service has said that Poland is running one of eastern Europe’s biggest underlying fiscal deficits.
The central bank has increased holdings by a sizable amount just a couple of times in the past 35 years. The latest purchases, valued at about $355 million at today’s price, come as global central bank holdings rose to the highest in two decades. Russia has been by far the biggest buyer, and Kazakhstan, India and the Philippines have also added to reserves.
Poland’s purchase “suggests gold’s appeal to central banks might be widening,” Matthew Turner, a strategist at Macquarie Group Ltd. in London, said in a report last week. “A broader and more representative base of central bank buyers can only be good news” for the gold market, he said.
Countries may be buying more gold amid expectations that the international monetary system will likely shift away from the dollar toward other currencies, according to Natalie Dempster, managing director of central banks and public policy at the producer-funded World Gold Council.
“Central banks have three main objectives when they are thinking about reserve assets: to keep their assets safe, to keep their assets liquid and to generate returns,” she said. “Gold can help to meet all three policy objectives.”
News Source: mining.com