Czech Central Bank Plans Tenfold Increase in Gold Holdings, New Governor Says Precious Metal "Good for Diversification"
The incoming governor of the Czech National Bank (CNB), Aleš Michl, has said he plans to increase the institution’s gold holdings almost tenfold from the current 11 tonnes to 100 tonnes. Michl also said he will ask the bank’s foreign exchange reserves management team to invest in stocks. Growing the CNB’s Shareholding
The incoming governor of the Czech National Bank (CNB), Aleš Michl, has said gold is good for diversification because “it has zero correlation with stocks.” Therefore, under his stewardship, the CNB hopes to increase its holdings of the commodity from the current 11 tonnes to 100 tonnes or even more. However, this will be done gradually, the incoming governor said.
With this plan, which sees the bank’s gold holdings grow by almost ten times, the new CNB boss, as one report noted, is seemingly following in the footsteps of other European central banks that have either repatriated or bought more tonnes of gold. For instance, the Hungarian central bank revealed in 2018 that it had grown its gold holdings tenfold while the Polish central bank is reported to have done the same in 2019.
Meanwhile, in his remarks during a wide-ranging interview with the Czech publication Ekonom, Michl, a conservative economist, also said he will propose to increase the CNB’s shareholding in stocks from the current 16 percent of reserves to 20 percent or more. He argued that central banks in Switzerland and Israel are already doing this and so are large state sovereign wealth funds.
A Profitable CNB
Concerning the management of foreign exchange reserves, Michl, who is set to begin his six-year tenure as governor on July 1, said he will encourage the management team to invest the reserves in stocks. When asked about the risks of using reserves this way, Michl responded: Yes, yield volatility would then be higher – that’s the risk. But the expected return, in the long run, would also be higher. Together with our CNB colleagues Michal Škoda and Tomáš Adam, we are trying to calculate this risk as part of a research project. My vision is to have a long-term profitable CNB.
Michl added that his goal is to make the expected returns on the CNB’s assets exceed the cost of the central bank’s liabilities. According to him, the CNB’s balance sheet and its income statement may seem unimportant to others, but are important to him.
Once the CNB starts to make a positive return, the generated profit will be used to “replenish the reserve fund and other funds created from the profit.” The surplus profit will be transferred to the state budget, Michl said. Tags in this story Aleš Michl, Balance Sheet, Czech National Bank, foreign exchange reserves, gold, stocks, Tomáš Adam, yield volatility
What are your thoughts on this story? Let us know in the comments section below. Terence Zimwara
Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route. Tesla CEO Elon Musk Has "Super Bad Feeling" About US Economy — Biden Responds ECONOMICS | 22 hours ago Soros Fund"s CEO: Recession Is Inevitable and Crypto Is Here to Stay ECONOMICS | 3 days ago
Image Credits: Shutterstock, Pixabay, Wiki Commons Previous articleEthereum’s Hashrate Surpasses Lifetime High as The Merge Gets Closer Next articleLayoffs Spread Across the Blockchain Industry as Bear Market Cycle Impacts Crypto Firms Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimerShow comments More Popular NewsIn Case You Missed ItOman to Incorporate Real Estate Tokenization in Virtual Assets Regulatory Framework
Real estate tokenization is set to be incorporated into Oman Capital Markets Authority (OCMA)"s virtual asset regulatory framework. According to an advisor with the authority, the tokenizing of real estate will open investment opportunities for local and foreign investors. Real ... read more.Tony Hawk"s Latest NFTs to Come With Signed Physical Skateboards Draft Law Regulating Aspects of Crypto Taxation Submitted to Russian Parliament Today"s Top Ethereum and Bitcoin Mining Devices Continue to Rake in Profits Survey: Adoption in Argentina Grows, With 12 out of 100 Adults Having Invested in Crypto