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Inspired by Polish example, Slovakia considers repatriating gold from U.K.

Bratislava, Slovakia – Several days after Poland repatriated nearly half of its gold reserves kept in the Bank of England, Slovakia has shown signs of following in its Visegrad neighbour’s footsteps.

Poland airlifts 100 tons of gold from U.K. back to Warsaw

Late last month, Poland brought home about 100 tons of gold previously stored in the vaults of the Bank of England, in order to “create reserves that will safeguard its financial security”, Polish Central Bank governor Adam Glapinski said.

As many as 8,000 gold bars were airlifted back to Poland, the Central Bank announced last Monday. “The operation of transporting gold to Poland took place by air. A total of eight flights were made, transporting one thousand bars in each flight”, it announced in a press release, adding that “the whole operation went smoothly” and they they were even thinking about issuing a special commemorative gold coin this month to celebrate the occasion.

“The gold symbolizes the strength of the country”, Glapinski said, praising the fact that Poland could generate “multi-billion” profits if it ever decided to sell its holdings.

After exponentially boosting the country’s reserves over the past two years (see graph below), officials in Warsaw have decided to bring a large bulk of it home, in light, according to analysts, of the looming threat posed by the U.K.’s departure from the European Union.

poland-gold-reserves
Poland’s gold reserves, in tons / Source: Trading Economics

Slovakia considers repatriation of gold reserves

Echoing Poland’s move, former Slovak Prime Minister and chairman of the ruling Smer party Robert Fico, who faces a critical parliamentary election in less than three months, urged lawmakers and central bankers to repatriate its 31.7 tons of gold stored in the U.K., citing uncertainty linked to the global economic situation and Brexit.

“You can hardly trust even the closest allies after the Munich agreement”, Fico told reporters, referring to the infamous 1938 treaty where France and the U.K. caved in to Hitler’s territorial demands on Czechoslovakia. “I guarantee that if something happens, we won’t see a single gram of this gold. Let’s do it as quickly as possible”.

What’s behind Central Europe’s gold rush?

Central European governments have embarked on a gold-buying spree in the last few years. “Gold is all that nationalist leaders in Europe’s east can talk about these days”, wrote Bloomberg a few days ago.

In 2018 and 2019, Poland’s Central Bank bought nearly 130 tons of the precious metal, doubling its gold reserves to 228.6 tons and making Poland the 22nd-biggest bullion holder in the world, and the single biggest in Europe’s Eastern half.

But Warsaw isn’t the only one. Following in the footsteps of countries like China and Russia, for whom gold is seen as a geopolitical tool to break the dominance of and its  foreign reserves’ dependence on the U.S. dollar, Serbia has been betting on gold as well, adding nine tons to its reserves in October alone, with Serbian leader Aleksandar Vucic noting: “We see in which direction the crisis in the world is moving”. Hungary too has increased its gold reserves by ten-fold last year, making its first bullion purchase since 1986 and bringing total reserves to 31.5 tons.

Global demand for bullion reaches three-year high

As a result of this gold-buying spree, global demand has reached a three-year high in the first half of the year, according to the World Gold Council (WGC). “Central banks, like other investors, sought safety in gold as they looked to protect themselves in the face of many looming risks”, WGC analysts pointed out.

Either to diversify its foreign reserves or de-dollarize in light of mounting geopolitical risks and trade tensions, gold has traditionally been seen as a highly safe and secure investment by countries around the world, as well as a symbol of national sovereignty and economic and financial self-sufficiency.

Worldwide, the countries with the biggest gold reserves, as of December 2019, were the United States, Germany, Italy, France and Russia.

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