The story of the ‘Nazi Gold Train’ is one which excites the imagination. Many believe that a train full of looted artefacts and gold from occupied Poland lies hidden in a secret tunnel somewhere in the southern mountains of the country. Whether there is any truth behind these rumours or not, people are actively searching for this train in various locations. Should it ever be uncovered, then it would be a sensational story.
That glittering shiny yellow metal is something that enchants us. Recently, the Polish government announced that it had purchased another quantity of this precious metal—at the end of the second quarter of 2024, Poland’s gold reserves rose to 377.4 tonnes, putting it into twelfth position when comparing gold reserves per country.
Poland has more gold than the UK
This may be surprising to some, but currently, Poland has 377.4 tonnes of gold, and the UK only has 310.29 tonnes of gold reserves. That the UK has only such a small amount is a long and complicated history, but it is enough to say that the biggest sale of UK gold occurred in 1999 when Chancellor Gordon Brown made the decision to sell half of the UK’s reserves.
This sale was announced beforehand, thereby ensuring that the gold was sold at the lowest possible price which came to be known as ‘Brown’s Bottom’. Ever since the value of gold has increased on average by 8% per year, and Brown’s decision to sell seems indefensible now, even downright bizarre. The 400 tonnes of Britain’s gold reserves were sold for prices between $256 and $296 an ounce, only for the value to soar to $2,677 per ounce today! How was it possible that the chancellor was allowed to carelessly dispose of this national asset costing the UK taxpayer billions!
Polish Gold Reserves
Gold is an important component of a central bank’s reserves because of its safety, liquidity and return characteristics – the three key investment objectives for central banks. The president of the National Bank of Poland, Adam Glapinski, recently revealed that the central bank would continue to buy gold and is aiming for it to make up 20% of the bank’s reserves.
Ownership of gold is simple, if you have it is yours. However, when a bank holds gold then this is a different story. When gold is leased out by a central bank, the bullion bank takes possession of it and sells it into the market, investing the proceeds. At the end of the lease period, the bullion bank buys the gold back on the open market and returns it to the central bank. Although the gold rarely changes physical location in this process, the claim or title to the gold does change hands.
Hence, the majority of Polish gold is held mainly at the Bank of England. Being an offshore island, with a long history of stability and its traditional role as the centre of the world gold market, the United Kingdom is perceived by many European countries as a safe place to store gold. Thus, during the 20th century, gold bullion from around the world flowed into the Bank of England for safekeeping.
Currently, only around 6% of the gold in the Bank’s vaults is held on behalf of the UK Treasury. The great majority of the approximately 400,000 bars held in the nine vaults deep below the Bank’s offices are held on behalf of other central banks and similar institutions.
Poland’s wartime gold
In 2019, more than 100 tonnes of gold were returned from London to Poland in a top-secret repatriation mission. These golden flights transported gold worth over $5bn that was loaded onto freighter aeroplanes and brought to Poland. It took eight trips to transport the gold back to Narodowy Bank Polski, the country’s central bank, where it is now kept.
I quite often encounter comments on social media about how gold was transported from Poland and stolen by the British Government.
In 1939 with the outbreak of WWII, 75 tonnes were transported to various locations for safekeeping and to prevent the seizure by the Germans; the entire Polish gold reserves were secretly transported across three continents to be stored in London, New York and Ottawa. However, 100 tonnes were returned to Poland in 2019 is at odds with the idea that Polish gold was stolen by others—but it is a good story which is used by trolls on social media.
As I have said, people get excited by gold.
