Polish economy at the forefront of the global race! NBP increases gold reserves

Gold has always been a prized asset, but in recent years its importance in global central bank reserves has increased significantly. The US dollar, while still the dominant global reserve currency, is increasingly being supplemented by gold. This trend has intensified in response to economic turmoil and a desire to reduce dependence on the US currency.

The People’s Bank of China has long been a major player in the gold market. However, its recent halt in purchases has created uncertainty in the market, which contributed to the May correction in the price of the metal. Despite this, other central banks have not reduced their purchases, notably the National Bank of Poland, which has been a standout on the international stage this year.

NBP surprises with its gold purchases

In 2023, Poland has made significant strides toward increasing its gold reserves. In July alone, the National Bank of Poland added 14 tons of gold to its holdings, bringing its total purchases this year to 33 tons. While Turkey is buying even more, its central bank often sells gold to support a currency that is under constant pressure from high inflation. As a result, Poland can be seen as a leader in this area, with a more stable policy regarding accumulating the precious metal.

Experts note that the NBP’s goal is to achieve a 20% share of gold in the country’s reserves – currently it is around 15%. Michał Stajniak from XTB points out that this is a significant increase compared to last year’s 10%. The NBP has been consistently increasing the share of gold in its reserves, which can be considered a diversification strategy.

Gold prospects

Even as global inflation eases, gold continues to attract investors’ attention. The metal’s high prices haven’t discouraged central banks from buying, even as jewelry demand, a key part of gold demand, has fallen. Jewelry demand hit its lowest level since 2020 in the second quarter of 2024, at just 410 tons. The decline was a result of high prices, a strong dollar and a weakening Chinese economy. But the upcoming wedding season in India and changes in customs policy could reverse that trend.

In addition, ETFs are starting to prepare to buy gold, which could put additional upward pressure on prices. ETFs that at their peak held about 110 million ounces of gold now hold just 82 million. If they return to record levels, the market could respond by rising prices due to limited availability of the metal.

The Future of Gold Prices

Gold traditionally appreciates in the face of interest rate cuts, and such a move by the Fed is expected soon. Looking back, historical data shows that gold typically gains about 20% on average over two years after the first rate cut. While the beginning of this year has already seen a 20% increase in prices, many analysts expect the uptrend to continue. However, a short-term correction following the upcoming Fed decision is possible, in line with seasonal market trends.

Despite gold prices hovering around historic highs, long-term forecasts remain optimistic. Michał Stajniak from XTB predicts that by the end of the year, the price of an ounce of gold could reach as much as USD 2,600, although a 5-10% correction is possible in the short term. It is worth noting that from the perspective of Polish investors, the price of gold has not yet exceeded PLN 10,000 per ounce, but this situation may change if the złoty begins to weaken.

Gold has enjoyed a reputation as a safe haven for years, and investing in the metal over the long term seems to be a risk-minimizing strategy. Despite the turmoil in financial markets and the decline in jewelry demand, central banks still see gold as a solid tool for diversifying reserves. As monetary policy eases, gold could become an even more attractive asset for investors, both institutional and individual.