Mihály Varga pledged to provide a strong response to any risks that threaten the inflation target, financial stability, and sustainable economic development.Continue reading
Following his appointment, Central Bank Governor Mihály Varga ordered an audit of gold reserves, including a thorough check of the weight of the reserves, the Hungarian National Bank (MNB) stated in a Facebook post.
Based on reports, the audit found that the 94.73 tons of gold reserves held in Hungary are complete and in perfect condition. A smaller portion of Hungary’s gold reserves, 15.5 tons, is held in the Bank of England’s vault in London.
The importance of a country’s gold reserves lies in their value stability: in addition to maintaining the stability of the financial system, they also play a key role in strengthening investor confidence.
Gold reserves are physical reserves of precious metals purchased by the state (more precisely, the central bank) and stored domestically or abroad in the form of bars, that are therefore independent of the risks of the international financial system. In the past, this formed the basis for money issuance, with a given country only able to issue as much currency as it had in gold reserves, but this function has now ceased. The last country to do so was the United States, which had the world’s largest gold reserves, when it abolished the convertibility of the dollar into gold in 1971. Since gold has retained its value for thousands of years, both in times of peace and war, gold reserves can be seen as a kind of insurance in times of crisis. It is therefore not surprising that the price of this precious metal is breaking records one after the other.
Even before taking office, the new leadership of the central bank made it clear that the MNB would focus exclusively on performing its statutory tasks in the future and was committed to the transparent and efficient operation of the institution.
Via Világgazdaság; Featured photo: Facebook/Magyar Nemzeti Bank