Bearing its long-term national and economic policy strategy objectives closely in mind, the Magyar Nemzeti Bank (MNB) has raised Hungary’s gold reserves from 31.5 tons to 94.5 tons. Following the decision, the MNB continued the process it started by increasing gold reserves by a factor of ten in 2018. As a result, based on the size of gold reserves, Hungary moved up from the middle of the international list to the top third by March 2021.

In history, gold has fulfilled several functions in different financial systems. Although from a monetary policy perspective, gold lost some of its significance in the 1970s, its role as a traditional reserve asset remained pivotal thereafter. As it carries no credit or counterparty risks, gold facilitates reinforcing trust in a country in all economic environments, which still renders it one of the most crucial reserve assets worldwide, in addition to government bonds. In recent years, the role of gold within international reserves has been enhanced at several central banks. At 656 tons, central banks’ demand for gold reached record highs in 2018 and also in 2019 (669 tons).

Taking into account the country’s long-term national and economic policy strategy objectives, the Magyar Nemzeti Bank decided to triple its gold reserves. Managing new risks arising from the coronavirus pandemic also played a key role in the decision. The appearance of global spikes in government debts or inflation concerns further increase the importance of gold in national strategy as a safe-haven asset and as a store of value. As a result of this decision, the country’s gold reserves have been raised from 31.5 tons to 94.5 tons, which sends Hungary from the 56th position to the 36th position in the international rankings based on the size of gold reserves. In the Central and Eastern European region, its position changed from 6th to 3rd. Gold reserves per capita in Hungary rose from 0.1 ounce to 0.31 ounce. Consequently, currently Hungary has the highest gold reserves per capita in the CEE region.

The Magyar Nemzeti Bank has held gold reserves since its foundation in 1924. The stock of gold reserves had increased until World War II. Towards the end of the war, the MNB rescued gold bars and coins weighing some 30 tons on its legendary ‘gold train’ to Spital am Pyhrn in Austria. The possession of the rescued gold reserves was returned in full to Hungary after the war had ended, which supported the stabilisation of Hungary’s economy and financial consolidation by backing the introduction of the new currency, the forint, which celebrates its 75th anniversary this year. At the time of the political transition, Hungary’s gold reserves were reduced in several steps from 46 tons to 3.1 tons as a result of the decision taken by the Magyar Nemzeti Bank’s management then in office. The gold stock had remained unchanged until 2018.

Based on the long-term national and economic policy strategy objectives, the MNB decided to significantly increase gold reserves first in 2018. Consequently, the stock of gold reserves rose tenfold from its previous level, from 3.1 tons to 31.5 tons in October 2018, reaching gold reserve levels of other CEE countries. With these purchases, the MNB continued the process it started in 2018.