It was almost inevitable that the Czech Republic would buy more gold. With all of its regional neighbours having recently either repatriated large quantities of gold (Germany and Austria), or bought large quantities of gold (Poland and Hungary), it seems that the Czech Republic has now taken note and does not want to be left out of this Central European gold rush. On 26 May in an interview with Czech publication Ekonom, the incoming governor of the Czech National Bank (CNB), Aleš Michl, said that he plans to massively increase the central bank’s gold reserves from the current 11 tonnes to over 100 tonnes or more. 1000% Increase in Czech Gold Holdings Talking to Ekonom’s editor Vojtěch Wolf, and deputy editor-in-chief, Martin Petříček, the soon to be central bank governor explained his approach to the management of the Czech central bank’s reserves: Ekonom question: “You have repeatedly said that the CNB should manage foreign exchange reserves differently, which have swelled in recent years. What is your vision on that?" Aleš Michl answer: “The reserve management team is professional, they have assignments from the bank board that perform well. I would like to give them a new assignment, to slightly increase the expected return on reserves. To do this, you need to have more stocks and more gold. And to do it gradually, step by step, it is a change of strategy over years." Ekonom question: “How should the proportions of the individual components develop?" Aleš Michl answer: “In our Assets and Liabilities Committee, I will propose to, gradually over the years, increase equities from the current 16 percent of reserves to 20 percent or more. The central banks of Switzerland, Israel or large state sovereign wealth funds, led by Norway, do the same. And I will propose to have more gold, from 11 tonnes to 100 and more tonnes. Gradually, over several years. Gold is good for diversification, it has zero correlation with stocks." The 44 year old Michl has been a member of the Czech central bank board since December 2018, and will begin his 6-year term as CNB governor on 1 July 2022, after having been appointed to the role by Czech president Miloš Zeman. The Ekonom interview also gives some insights into how the new CNB governor thinks about managing the Czech central bank’s gold and foreign exchange reserves, with the word ‘wealth’ cropping up a number of times. Michl – “My vision is to have a long-term profitable CNB. We are at a great loss now. I would like to set the strategy so that the expected return on assets, which are foreign exchange reserves, in the long run exceeds the cost of the central bank’s liabilities, which are mainly deposits of banks that we have to pay interest on." Ekonom question: “For what reason?“ Michl – “It is a vision to create a nation’s wealth that exceeds my six-year term.” Elsewhere he again mentions the wealth of a nation: Michl – “Rather than predicting another devastating event, it is much easier to conclude that a country, nation, population, business or enterprise can better mitigate the effects of disasters if they have savings, wealth, rather than a pile of debt in better times. “
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