Two years ago the National Bank of Poland was widely criticized by the crypto community for running ads bashing Bitcoin and crypto currencies in general. They even created a YouTube video titled “10 differences between money and cryptocurrency that you need to know”. It’s disappointing that the central bank chose not to present this information transparently because they did make several valid points about the dangers of cryptocurrencies and the scams that have been associated with them.
In perhaps one of the boldest moves yet by a central bank to show what they do believe is actually money, last week the National Bank of Poland made headlines with their absolutely massive purchase of 125.7 tonnes of gold. That singular purchase has more than doubled their original gold reserve holdings bringing their current total to 228.6 tonnes. To put this recent purchase in perspective, in 2018 the central bank purchased only 25.7 tonnes, making this year’s purchase a 500% increase.
The rapid build up of gold reserves by central banks of the world has been a one-way trend for the last several years and the quantities of purchases are moving up high double to triple digits in the last three years.
We believe that central banks are leading the way with pension funds soon to come right behind them. Pension funds have a fiduciary obligation to protect pensioner savings which is why most pension funds are required to put the majority of their funds in investment grade government bonds.
The problem lately is that the majority of investment grade government bonds now have a negative yield. In a world where central banks are printing currency out of thin air to purchase government bonds with negative yields and at the same time exchanging their printed money for physical gold it’s a no brainer preference for pension fund managers to prefer keeping their pensioner savings in gold.