Hungary can undoubtedly be considered among the big fish of the 2024 gold market. Based on the announced purchases, it became the seventh largest player last year, with a September purchase of 15.5 tons initiated by the Magyar Nemzeti Bank (MNB). If we take the biggest deals of the year as a basis, then Budapest is even higher on the list.
The aforementioned transaction was the second largest lump sum gold purchase of the entire year. A bigger transaction than this was initiated only from the Polish side, Warsaw came to the top of the gold market with a lot of 42.3 tons, Kristóf Juhász, of Conclude Befektetési Zrt, which deals with the sale of investment gold, told Népszava. company manager, summarizing the events of the precious metal market last year. He added, however, that these numbers cover the announced items, and China cannot be forgotten in this segment. And Beijing essentially keeps its purchases quiet due to price management. That’s why everyone on these lists is most likely pushed back one place. Regarding Chinese purchases, it can be said that they want to disguise their central bank purchases as purchases by private investors. However, looking at the deliveries of the Shanghai Gold Exchange, they are almost certainly government orders.
Private investors mainly look for one-kilogram bars on the Chinese stock exchange, while 12.5-kilogram bars are the typical form of central bank purchases.
Looking at the September gold contracts, the Chinese central bank’s purchases can be put at around 60 tonnes.
By the way, the gold market performed quite well in 2024, even compared to classic capital markets. Calculated in dollars, it was able to show an annual return of 29.7 percent, which even the American stock markets could not keep up with. In the case of the latter, an average return of 27.5 percent was calculated, while for emerging markets it was 12.95 percent, meaning that the precious metal outperformed both. That’s not all, noted the manager of Conclude, the yield of gold in forints exceeds 45 percent, which can be said to be quite an attractive performance.
The price of the precious metal went on a truly spectacular upward trajectory last year. It is interesting to note that – as we have already pointed out –
the stock market “crossed” the distance between $1,000 and $2,000 in just a decade and a half, while it took barely 10 months to bridge the level of nearly $2,800 reached in 2000 and at the end of October, which is still considered a peak.
In light of this, the forecast of Goldman Sachs, one of the world’s largest banking houses, does not seem overly optimistic. They calculate that the growth is not over yet, and according to them, at the end of 2025, sales will be close to the level of $3,000 per ounce.
Another striking characteristic of the market – which is less visible to investors, but can still be evaluated as important – was that, due to the desire to become independent from the dollar, almost all emerging market states ensure that their gold reserves are partly or entirely within their state borders. So essentially everyone is trying to repatriate their existing and newly purchased stocks from London and New York. Thus, the MNB also stores its gold reserves at home, but one of the largest repatriations of the year was from India. New Delhi had about half of its gold reserves, now 800 tons, shipped home from London.
Staying with the central bank reserves, it is worth going back to last year’s purchase by the MNB. Because of the mentioned 15.5 tons, the reserves of the central bank increased to 110 tons. And this is a historic peak. Never before has Hungary sat on such a large gold reserve.
(The previous direct record – of course – was 94.5 tons, which the Hungarian gold reserves reached in 2021.) In the case of the central bank, which is 100 years old this year, the previous peak can be set in the 1970s, when the country’s gold reserves were around 70 tons . After that, however, the importance of gold in the financial markets became more and more in the background, as a result of which the gold reserve was also reduced to a fraction at home. The MNB’s gold stock decreased to 3.1 tons by the beginning of the 1990s, and remained at this level until 2018. From there, the MNB gradually built up the current gold reserve of 110 tons, which is 14.5-15 percent of the total foreign exchange reserve.
The latter level is also emphasized because, according to the World Bank’s latest recommendation, it is healthy to create gold reserves at around 20 percent compared to foreign exchange reserves, which is typically met in Western countries. The central banks of emerging economies are now trying to catch up to this value. With this in mind, the move of the Hungarian central bank cannot be said to be extraordinary at all, nor can the explicitly announced strategy of the Czech and Polish central banks. For example, Prague has ordered the purchase of 2 tons every month since 2022, while Warsaw will continue to buy gold until it reaches the 20 percent limit. As we indicated earlier, these central bank purchases are also important because, according to market analyses, every 100 tons of physical demand raises the price of gold by at least 2.4 percent. We would add to this that, according to data from the World Gold Council, global investor demand for gold – the sum total of stock and over-the-counter transactions – has not fallen below 100 tons in any quarter since the outbreak of the Russian-Ukrainian war. Moreover, the last three months of 2022 were remarkable, when, according to the organization’s estimate, the total demand for gold in the world exceeded 1,300 tons.
Here, the 100-gram tiles are the most popular
Regarding domestic investment gold sales, it can be said that sales and purchases were basically in balance in the past year, a balanced market has emerged. The most sought-after item among small investors was the 100-gram bar, but 1-ounce gold coins were also very popular. On the part of private bank customers, the most “popular” size was the 1 kilogram bars, said Kristóf Juhász. It can also be seen that after the current price increase, those who used to look for 100-gram packages have now gone lower and typically buy 50-gram gold bars and add silver coins to their precious metal portfolio. The expert added that now, around Christmas, during the gift-giving season, purchases and sales have also picked up. During this period, 5, 10 and 20 gram gold bars and more special, historical gold coins are very popular – the former are often given by company managers as anniversary gifts to their employees. Overall, he added that the exchange rate of the forint is a determining factor in the demand for the precious metal. As soon as the quotation of the Hungarian currency against the euro reached the level of 400, gold buyers appeared almost immediately, and although the market is balanced, the buying activity has been maintained by the exchange rate above 400 ever since.
Source: nepszava.hu
