Hungary is buying gold

For the first time since 1986, Hungary’s central bank is buying gold—in bulk. Tuesday, the Eastern-European country announced that it had boosted its gold reserves ten-fold, up to 31.5 tons of the metal, partly in the name of financial stability and partly to keep up with its neighbors.

The regulator says it wants to improve the security of the nation’s wealth and to reduce risks.
According to the bank’s governor, Gyorgy Matolcsy, the decision was of “economic and national strategic importance” and has been made after Prime Minister Viktor Orban requested a year ago that the bank assess its gold strategy.

Matolcsy has also recalled Hungary’s heritage as one of the world’s largest gold producers in the Middle Ages.

Gold now accounts for 4.4 percent of Hungary’s national bank’s reserves, according to the bank’s vice-president Marton Nagy.

The purchase of the precious metal takes Hungary’s holdings to the highest in almost three decades, but the country is still a relatively small bullion holder. It ranks outside the top 50 globally, according to World Gold Council data.

“It’s a strange move, a big increase, and it seems quite high,” Timothy Ash of Bluebay Asset Management told the Financial Times.

This is the latest in a series of gold acquisitions by Eastern European and Central Asian countries. Earlier this year, Poland became the first EU member to buy gold this century, accumulating nine tons over July and August. In the first six months of this year, Russia, Turkey, and Kazakhstan accounted for 86% of central bank purchases. Russia has been adding about 20 tons to its reserve each month, on average, this year. All told, central banks are buying gold for their reserves at the fastest pace in six years, according to analysts at Macquarie.