National bank of Poland was the biggest central bank Gold buyer in Q2

The National Bank of Poland was the biggest central bank gold buyer in the second quarter. A Euronews report speculated that the country is "preparing for the worst."

The Polish central bank added 19 tons of gold to its reserves in Q2. According to the Euronews report, the buying spree boosted the country’s total gold reserves to 377.4 tons.

Poland was the second-biggest gold buyer in 2023, adding 130 tons of gold to its holdings last year.

Gold currently makes up about 14.7 percent of Poland’s total reserves.

NBP Governor Adam Glapiński recently indicated the Bank of Poland will continue to add gold to its reserves with a goal of holding at least 20 percent of the country’s reserves in gold.

"This makes Poland a more credible country, we have a better standing in all ratings, we are a very serious partner, and we will continue to buy gold. The dream is to reach 20 percent.”

In 2021, Glapiński announced a plan to expand the country’s gold reserves by 100 tons. The central bank reached that goal in September of '23 and kept buying.

When he announced the initial plan to expand its gold reserves, Glapiński said holding gold was a matter of financial security and stability.

"Gold will retain its value even when someone cuts off the power to the global financial system, destroying traditional assets based on electronic accounting records. Of course, we do not assume that this will happen. But as the saying goes – forewarned is always insured.

“And the central bank is required to be prepared for even the most unfavorable circumstances. That is why we see a special place for gold in our foreign exchange management process."

Glapiński also pointed out that “Gold is free from credit risk and cannot be devalued by any country’s economic policy. Besides, it is extremely durable, virtually indestructible.”

Back in 2021, Glapiński also hinted that worry about the U.S. dollar's stability was driving the decision to increase the country’s gold reserves.

“Gold is characterized by a relatively low correlation with the main asset classes – especially the US dollar dominating the NBP reserve portfolio – which means that including gold in the reserves reduces the financial risk in the process of investing them.”

According to Euronews, the central bank is currently buying gold to “diversify their reserves to protect against macroeconomic uncertainty and geopolitical shocks.”

“As such, gold’s relatively stable performance during times of crisis, as well as its inflation hedge qualities are driving factors behind the central banks picking the metal. It is also an effective way to diversify central bank portfolios and is considered to be highly liquid, with no default risk.”

Euronews also noted that gold provides a hedge against the weaponization of the dollar because the yellow metal is “less affected by policy risk and can be used as a valuable collateral and policy tool.”

“In some cases, gold can also help countries facing international sanctions, such as Russia, to avoid them. This, in turn, incentivizes these countries to buy more gold and use it to help maintain their liquidity, in case other means of finance are blocked off or difficult to access.”

Gold demand surged in Poland following the pandemic and again after Russia invaded Ukraine. According to Euronews, “Investors also fear that the Russian invasion in Ukraine may spill over to Poland and want to prepare themselves in case of such a scenario by investing more in gold.”

The physical gold market in Poland has been among the strongest in Europe over the last three years. 

Poland’s central bank is one of many adding gold to its reserves. Central banks globally added a net 483 tons of gold through the first six months of the year,  5 percent above the record of 460 tons in H1 2023.

Last year, central bank gold buying fell just 45 tons short of 2022’s multi-decade record.

According to the World Gold Council, central banks net gold purchases totaled 1,037 tons in 2023. It was the second straight year central banks added more than 1,000 tons to their total reserves.

Central bank gold buying in 2023 built on the prior record year. Total central bank gold buying in 2022 came in at 1,136 tons. It was the highest level of net purchases on record dating back to 1950, including since the suspension of dollar convertibility into gold in 1971.

China was the biggest buyer in 2023.