The Polish Central Bank is Having a Gold Rush

Following the onset of the COVID-19 crisis, long queues formed at precious metal traders in Poland. Two years later, Russia’s invasion of Ukraine caused people to turn to gold once again. Unlike other Western central banks, Poland’s central bank views gold not just as a traditional asset, but as a crucial cornerstone for securing the country’s future. Consequently, Poland is experiencing a gold rush.

The war in the neighboring country shocked the Polish people and brought a large influx of refugees. For many, gold offered both financial and psychological security in this turbulent time.

While the queues have subsided, the demand for gold in Poland remains steady in the long term

The war has persisted for over two years, and additional uncertainty has arisen from the situation at the Polish-Belarusian border, where illegal immigrants have begun entering from Belarus. According to the Polish government, this crisis was orchestrated by the governments of Belarus and Russia.

Thirty-eight-year-old entrepreneur Radoslaw Paklikowski began investing in gold in 2021, acquiring both gold coins and bars. He allocates 5 percent of his earnings to precious metals in his investment portfolio.

“Having real physical gold is important, and I don’t mean having a ton of gold. It’s important to have enough to cross the border and ensure the safety of your family if something happens,”

he told the Associated Press

War is Feared

Many in Poland fear that Russia’s ambitions may extend beyond Ukraine, potentially threatening their own country. As a result, some people are seeking to purchase real estate in Spain and Italy. Unlike real estate or art, gold and silver are easily transportable.

In Poland, the horrors of the Second World War are well remembered. During that time, precious metals provided security and helped people survive. Families recount how gold jewelry or coins enabled them to buy food or safely cross borders controlled by the Soviet Union or Nazi Germany. Six million people died in Poland as a result of World War II.

Read more on the topic here: How does geopolitical tensions affect the price of gold?

Marta Bassani-Prusik, head of precious metals trading at the Mint of Poland, noted that their customers include Poles familiar with World War II memorabilia. Many are also individuals who returned to Poland after the collapse of the Soviet Union.

“They say they are alive only because of gold, because their grandparents had a gold coin or bar,”

explained Bassani-Prusik

He noted that the Polish gold market was relatively calm before the coronavirus pandemic and the war. However, sales began to surge as “everyone was afraid of what was happening.” The wave of inflation that followed the war further boosted the market. During this time, the annual price increase in Poland reached 18 percent.

The Price of Gold has Increased Considerably in Local Currency

In the Polish national currency, the price of gold has increased by 80 percent over the past five years, reaching 9,373 zlotys per ounce (with 1 euro equal to 0.2326 zlotys at the time of writing). Over the past ten years, the increase is 132 percent, and over the past twenty years, it exceeds 500 percent. While the price of gold in dollars only surpassed the peaks of 2020 this year, in zlotys, gold has set new records for four consecutive years.

Global demand for gold reached a record high last year, approaching nearly 4,900 tons, with central banks accounting for a quarter of this demand. While Asian and Middle Eastern countries are notably active in the gold market, the Polish Central Bank stands out in Europe, having acquired hundreds of tons of gold.

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A significant trend in the global gold boom is that, like central banks, retail buyers are primarily Asian investors, while the surge in Europe has subsided over the past year. Since 2020, Poland has emerged as one of the strongest gold markets in Europe, following Germany, Switzerland, and Austria. In Poland, people’s wealth has grown rapidly, and the COVID-19 crisis reignited deep-seated traumas in the collective unconscious, prompting people to turn to gold.

The Mint of Poland, which has been operating since 1766, was once a public sector enterprise

After the collapse of the Soviet Union, the company was privatised and is now listed on the Warsaw Stock Exchange. It is the only entity authorised to mint coins for circulation in Poland. Additionally, the Mint produces coins for other countries around the world, including Paraguay, Ireland, Luxembourg, and Thailand, according to the Associated Press.

Forty-year-old entrepreneur Marcin Grzesiak recently purchased gold for nearly 29,000 zlotys in cash and put the gold coins in his pocket. Grzesiak, who lives in eastern Poland near the border with Belarus, told The Associated Press that he wants to diversify his investments due to the geopolitical situation and the threat of cyberattacks. “We live in turbulent times,” he stated. “I did not expect that Russia would attack Ukraine. Even my Ukrainian friends did not believe that Russia would attack. Anything can happen.”

The Polish Central Bank is Officially the Second Largest Buyer After China

The gold rush hasn’t been limited to Polish citizens in recent years; the Polish central bank also decided a few years ago to increase the proportion of gold in its reserves to 20 percent. To achieve this, tens of tons of gold have been purchased over the past few years.

Last year, Poland’s central bank increased its official gold reserves by 130 tons, accounting for more than a tenth of global central bank demand. Only China purchased more gold than Poland last year, increasing its official reserves by 225 tons. You can read more about how Chinese retail investors and the central bank are increasingly shaping the gold market here.

The Polish Central Bank has announced its goal to increase the share of gold in its reserves to 20 percent. With last year’s purchases, the share and amount of gold has already risen to 13 percent. This year and next, they plan to acquire tens of tons more gold.

“Why does the central bank own gold? Because gold retains its value even if someone pulls the plug on the global financial system,” Adam Glapinski, head of the Polish Central Bank, told local media. “Of course we don’t expect that to happen. But as they say: those who are forewarned are always safe. And the central bank must always be prepared for the worst. Because of this, gold also plays a very important role in the management of our reserves.”