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The gold index is rising. The CNB buys gold in foreign exchange reserves again

12 July 2021

According to the findings of the portal editorial staff, the Czech National Bank (CNB) has increased its foreign exchange reserves in gold three times over the past six months. First in December last year by 20,000 ounces, ie by approximately 622 kilograms, then in March this year by another 9,000 ounces (approximately 280 kg) and most recently in June by 15,000 ounces (approximately 466 kg). The CNB did not issue a report on the expansion of the gold part of its foreign exchange reserves in any of the cases.

The so-called The Gold Index, which has been prepared by Zlato analysts since 2020, expresses the ratio between the 70-ton gold treasure at the establishment of the independent Czech Republic and the current state of the most valuable metal in the CNB's foreign exchange reserves. Thanks to central bank purchases in the last year, according to analyst calculations, at the end of June 2021, the index exceeded 14 percent.The central bank began its latest purchases of the rarest metal last June, when it purchased 1.2 tonnes of gold. At the beginning of this year, it held almost 9.5 tons of "yellow metal", which is comparable to what it last had in its safes in mid-2017. oz.), ie less than eight tons.

The March purchase of another 9,000 ounces increased the central bank's gold reserves to 314,000 trs. oz., which is the state that the CNB last had in its foreign exchange reserves at the end of 2016 and which corresponds to almost 9.8 tonnes. The acquisition of another 15,000 ounces of "yellow metal" in June increased the stock to 317 thousand troy ounces (9.86 tons), as 12,000 ounces fell from the CNB's safes in April and May.

Gold decreased from reserves due to commemorative coins

Year-on-year, the CNB increased its gold reserves by more than 2.5 tonnes. This is approximately less than a ton more than was used in the five-year cycle of commemorative gold coins of the Castles of the Czech Republic. According to a statement by Markéta Fišerová, Director of the Communications Department and spokesperson for the CNB, from October last year, a total of 1,653 kg of gold from the central bank's foreign exchange reserves was used to produce all coins."It is good that the central bank continues to buy gold at a time when money is being" printed for life "in the world, or the unprecedentedly largest debt monetization in history is taking place," says David Marášek, chief analyst at Zlato, one of leading domestic seller of this investment metal.The holding to which the company belongs announced in April this year through the London Stock Exchange that it owns the Karaberd gold mine in Armenia, which, according to the geological expertise of the multinational company CSA Global, contains 6.92 tons of gold. By comparison, this is about two thirds of what the Czech National Bank currently holds.

The Czechia is still poor relatives

Despite the last four purchases of "yellow gold", the CNB is still a so-called poor relative worldwide, but also in comparison with the Czech Republic's neighbors. According to the World Gold Council (WGC), with less than ten tons of precious metal in its foreign exchange reserves, the Czech Republic has approximately 10 times less gold than recommended by the International Monetary Fund (IMF).The fund, the world's third-largest holder of "yellow metal" in its reserves after 2,814 tons of gold, recommends that its member states have at least three percent gold in their foreign exchange reserves. "Of the top 100 countries in the WGC rankings, the vast majority of countries currently meet the recommendations," says Marášek.

For example, Singapore, which holds more than 127 tonnes of gold in reserves, South Korea (105 tonnes), Brazil (79.3 tonnes), the United Arab Emirates (55.4 tonnes), Malaysia (38.9 tonnes) or Bangladesh (14 tonnes). At the same time, it is clear that all these countries have more gold in their foreign exchange reserves than the Czechia, "he adds.

Hungary has tripled its reserves this year

When it comes to gold held by our neighbors' central banks, the Czechia is a "poor relative" without any discussion. Although Germany has been "making money" in recent years by selling its central bank's gold, it is still the second country with the largest gold reserves (3,360 tons) after the United States.According to the WGC, Slovakia has 31.7 tonnes of gold (18.7% of total foreign exchange reserves), Poland has less than 230 tonnes (7.8% of total foreign exchange reserves) and Hungary has tripled its reserves to 94.5 tonnes (15.5% of total foreign exchange reserves) this year. foreign exchange reserves). Hungary now has the highest gold reserves per capita of all Central and Eastern European countries.