In a fascinating turn of events this October, the MNB (Magyar Nemzeti Bank), or Hungarian Central Bank has announced a nearly 10-fold increase in Hungary’s gold holdings.
Almost all countries have gold reserves. Some have more than others but they all serve the same purpose. They act as a safety net should their fiat currency fall or fail. In effect, gold reserves give a country something of value to trade. Therefore, gold can be viewed as a universal currency.
The price of gold fluctuates. Nevertheless, it’s always been considered a good long-term investment, particularly due to its ability to retain purchasing power. The recent increases in Hungary’s reserves have certainly been a topic of conversation. Speculation as to what caused the sudden impulsive purchase has varied greatly.
However, Hungary isn’t the only country that has been adding to their precious metal reserves recently.
Poland has added an additional 4.4 tons to their reserves in the past few months.
Russia’s gold reserves have also increased, nearly quadrupling in the last decade.
What does this all mean? No one is certain. However, Hungarian authorities have stated that the bank’s recent and somewhat large purchase was made for the purpose of stability and not investment. Hungary’s recent gold bullion purchase has already been physically transported and secured domestically.
Gold has always played a big role in providing countries with stability and confidence. Due to the world economy and political unrest in many countries, some have speculated that the Hungarian government might be preemptively preparing for something.
It seems that Turkey has also increased their own precious metal imports as well. Reports show an increase of 44 tons between January and July of 2018. Could it be that the Hungarian government is simply following their example?
The European Union has certainly had its share of problems. While Hungary and Poland are members of the EU both countries have rejected using the Euro as their currency. This decision, along with their disagreements over immigration policies, has left Hungary and Poland on the “edge” of the EU.
There is speculation that this tension is one of the reasons behind Hungary’s recent large increase in gold reserves. If they opted out of the EU they would certainly want to have assets to back their new place in world government.
There has been no official announcement from Hungary or from the European Union concerning their disagreements. It seems however that decisions must be made. Will they comply with currency and immigration policies set out by the EU? Or is their recent purchase gold a preemptive sign of them deciding to cut ties with the EU and hold onto their independence as a country, possibly with Poland by their side.