Poland's 'gold SAFE 0%' foundation shrinks by 65 billion złoty since February

Poland's central bank, Narodowy Bank Polski (NBP), is facing scrutiny as the value of its gold reserves has significantly decreased, impacting a proposed financial program.

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It's a bit like building a castle on sand. Even if we assumed that the necessary legislative work would be implemented at the moment this idea appeared and everything went through a fast track, counting on nearly PLN 200 billion would be difficult.

As of the end of June, the NBP's unrealized profit on its gold holdings stood at 127.5 billion Polish złoty. This figure represents the difference between the market price of the gold and its purchase price. However, this is a substantial drop from the estimated 193 billion złoty in unrealized profits recorded at the end of February. Over this four-month period, the market price of gold fell by approximately one-quarter, from about $5,300 per ounce to around $4,000.

This decline in gold prices has cast doubt on the feasibility of the "Polish SAFE 0%" program, an initiative proposed as an alternative to an EU program. Earlier in March, Leszek Skiba, an economic advisor to President Nawrocki, had estimated that operations on the gold reserves could potentially yield up to 185 billion Polish złoty over several years. However, Michał Dybuła, chief economist at BNP Paribas Bank Polska, now views the recent price drop as exposing the fragility of this idea, likening it to "building a castle on sand."

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Gold is still in an upward trend, it has only corrected very sharp increases from the last year.

Despite the recent correction, some analysts believe gold remains in a long-term upward trend. Kamil Sobolewski, chief economist at Employers of Poland, notes that gold prices have corrected after sharp increases over the past year. The average purchase cost of gold in the NBP's reserves is estimated to be around $2,300 per ounce, leaving a considerable buffer even at the current market price. Nevertheless, the volatility serves as a reminder that plans based on unrealized profits from assets like gold require caution, and such estimates should not form the sole basis for financial planning.

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Its estimates should not be the basis for any purchasing plans.