Serbia recently returned to the country all the gold reserves stored abroad and currently has 37.2 tons of this precious metal worth 1.9 billion euros.
As reasons for returning gold bars from safes in Switzerland and England, the NBS stated that “in an environment of heightened global uncertainty, it wanted to further increase the security and availability of its monetary gold.”
Although in the last decade many countries in the world are returning to buying and storing gold as the most traditional form and protection against inflation, there are few who have returned complete reserves to their safes.
NBS Governor Jorgovanka Tabaković stated on November 23 that after the message of the President of Serbia, Aleksandar Vučić, “immediately, within two months, she organized the transfer of all gold reserves to Serbia.”
As she said, a few months after the meeting with the representatives of the International Monetary Fund, Vučić asked “whether Serbia’s gold reserves are out”.
“I said that they were abroad, in Bern, Switzerland, and that only one ton remained in London from that time. Vučić told me that he thinks that it should be here in Serbia, with the remark – you don’t know what is happening in the world,” Tabaković said for Pink TV.
The NBS did not answer the question of RSE about the specific risk that the President of Serbia spoke about.
Why was the gold returned to Serbia?
“We have enough foreign exchange reserves even without that gold, but God forbid, if there are some swings in the world, we have gold in our country,” economist Sasa Djogovic told RSE.
“In the case of really bigger disturbances, the price of gold rises in relation to currencies, and then you are safer because you can sell certain quantities. Gold is used in difficult moments when the global economic situation is unfavorable or in the case of possible political pressures and sanctions, so that you do not freeze your reserves somewhere abroad,” says Djogovic.
Stating that gold reserves make up 11.6 percent of the country’s total foreign exchange reserves, the NBS responds that the trend of returning reserves to home countries in the last few years is present in many countries.
“This trend is due to efforts to increase the availability and security of gold reserves in times of crisis and uncertainty, the fact that in a global environment of low and negative interest rates, the cost of keeping gold is very low, and efforts to reduce the cost of storing gold in physical form, which are present in the case of keeping gold abroad,” the NBS said.
One of the primary roles of gold today is the diversification of reserves. In times of crisis, banks may be forced to print more money to prevent economic turmoil, but the increase leads to currency devaluation.
Gold, on the other hand, is a limited commodity to which supplies cannot be easily added. As such, it represents a natural protection against inflation. The ratio of gold and the US dollar, another large reserve asset, is an additional element of its attractiveness. When the dollar falls, the value of gold usually rises, which allows central banks to protect their reserves.
Gold is traditionally kept in the safes of foreign banks, and in times of instability, countries withdraw it to ensure that they can use it in the event of a crisis. Now, according to economist Sasa Djogovic, it can be linked to the corona virus pandemic.
“The main global disturbance is currently a pandemic and how long it will last, whether new strains can cause new fluctuations in the market, which could again lead to a decline in economic flows. In those cases, the price of gold would rise again,” says Djogovic.
The price of an ounce (about 31 grams) of gold on November 30 was 1,797 dollars.
Which countries are returning gold home?
The largest custodians of gold in the world are the Fed (Federal Reserve Bank) in New York and the Bank of England in London.
In 2013, Germany began the process of returning gold to the vaults of the Bundesbank in Frankfurt, given that 70 percent of the leverage was in the central banks of the United States and France.
“Germany withdrew part of its gold reserves, which it kept in America. She has kept them in America since the Cold War, fearing threats from the East. She returned it a few years ago, but she did not return everything,” professor at the Faculty of Economics in Belgrade and former NBS governor Dejan Soskic said for RSE.
In 2014, the Netherlands moved about 122 tons of gold from New York to Amsterdam. The Dutch central bank said at the time that “in times of financial crisis, it is better to have gold on hand.” The country continued to store gold reserves in New York, Ottawa and London.
Austria has transferred half of its gold reserves to Vienna, while the other half is in Great Britain and Switzerland.
In 2019, the Romanian parliament adopted a bill asking the national bank to return to the country almost all the gold reserves it held in the Bank of England. Romania’s central bank has said it pays high fees for keeping gold abroad (71,000 dollars a year in taxes), but that the country’s reserves would be readily available in the event of a crisis.
Recently, the members of the European Union, Poland and Hungary, have been regularly replenishing their gold funds.
According to the list of the World Gold Council, Serbia today ranks 54th and has the most reserves compared to the countries in the region.
Behind it is Northern Macedonia in 74th place with 6.9 tons of gold reserves, followed by Slovenia with 3.2 tons and Bosnia and Herzegovina with 2.9 tons. Croatia sold its gold reserves after 2001, BiF reports.
