Hungary Plans To Repatriate All Of Its Gold In Foreign Vaults
A lot of countries have been taking their gold back from foreign banks in countries like Britain and France. Hungary is the latest country in the list of countries repatriating their gold. Germany bright $31 billion worth of gold from the US, England and France. This is almost half its gold reserves. In 2015, Australia announced its plans to bring half of its gold reserves from foreign vaults. The these aren’t the only two countries with plans to repatriate their gold, the Netherlands and Belgium have also launched their own plans to repatriate their gold. Even individual US states like Texas are planning to repatriate gold into their border. Analysts also believe that having gold reserves at home will boost their financial standing.
There is an interesting story behind the Hungarian gold reserves. The country has been in the gold industry since 1924. Although it is not a great gold producing country, but it bought and held gold reserves since the early 1920s. The US Army actually stopped a train transporting gold out of the country. Hungary, which was pro-Nazi, had been hoping to ship its gold reserves to Austria but that plan was thwarted by the US. In 1946 the US repatriated the country’s gold. So for years Hungarian gold was in foreign hands. It is believed that Hungary had 65 to 70 tons of gold. In the 1980s, just after the Bretton Woods System collapsed, Hungary sold a substantial amount of gold reducing it to the barest minimum level. By 1992, the gold reserves had been reduced to 3 tons. The 2008 global financial crisis forced a lot of governments to rethink the role of gold and keeping enough reserves to hedge against risks like the ones that came in 2008.
The country’s gold holdings have remained tiny when compared to other Central European countries. For instance, Poland and Romania held a combined 103 tons of gold while Serbia had about 13 tons. Hungary’s gold was substantially smaller. Despite the tiny holdings of gold the Hungarian Central Bank had not been particularly interested in buying and hoarding more gold, until now. The National Bank of Hungary (NBH) repatriated 100,000 ounces of gold worth EUR130million which was held by the Bank of England. This is in line with the trends that a lot of countries have been following.
Gold repatriation may be the latest trend but it underscores the importance of having physical gold you can have easy access to. When they were not buying physical bars of gold, Hungarians where trading “paper-gold” or Gold-backed exchange-traded funds (ETFs). This might have been good enough to keep Hungarians participating in the gold market. However, physical gold offers stability and security. This is the reason why countries like Hungary, Germany, France, Venezuela, Turkey and other countries are bringing their gold back to their own vaults. Having more gold in Hungary will strengthen the economic confidence towards the country. The gold market is importantly linked to geopolitical risks as an economic safe haven.