Hungarian Central Bank considers increasing gold allocation: from 25.5% to higher, strategic considerations behind it

Hungary’s Central Bank Governor Világ recently stated that the central bank may consider increasing the proportion of gold in its foreign exchange reserves. This statement was not sudden but made in the context of the central bank maintaining its benchmark interest rate at 6.5% and continuing to implement a tightening monetary policy. According to the latest data from the World Gold Council in January, as of November 2025, Hungary’s gold reserves amount to 110 tons, accounting for 25.5% of its foreign exchange reserves. Where does this ratio stand among central banks worldwide? What is the rationale behind increasing the gold allocation?

Current Situation: What Does a 25.5% Gold Ratio Mean?

Based on publicly available data, the proportion of gold reserves among major global central banks varies significantly. The United States holds over 50% of its foreign exchange reserves in gold, and European central banks like Germany and Italy also generally have gold ratios exceeding 50%. In comparison, Hungary’s 25.5% is a moderate level, indicating room for further increase.

The 110 tons of gold reserves constitute just over a quarter of Hungary’s foreign exchange reserves, which is already a substantial allocation. However, from the central bank governor’s remarks, they believe this ratio can still be raised.

Why Do Central Banks Want to Increase Gold Holdings?

There are several key considerations behind this decision:

• Risk Hedging: In an environment of ongoing geopolitical uncertainties, gold as a final store of value is of undeniable importance. Increasing gold holdings can enhance the stability and credibility of reserves.
• Inflation Expectations Management: The central bank maintains a high interest rate of 6.5% and continues to implement tightening policies, aiming for a 3% inflation target. Gold, as an inflation hedge asset, increasing its share helps reinforce this policy intent.
• Monetary Policy Signaling: Raising the gold proportion sends a strong signal to the market, indicating the central bank’s focus on financial stability. This supports the forint exchange rate and market expectations positively.
• Global Trend Response: In recent years, there has been a clear global trend of central banks increasing gold reserves, especially emerging market central banks actively allocating gold. Hungary’s move aligns with this worldwide trend.

Potential Impact and Future Focus

If Hungary’s central bank indeed increases its gold proportion, it will require adjustments in other foreign exchange assets, possibly involving reductions in holdings of USD or other currencies.

The central bank governor also mentioned that the appreciation of the forint helps limit import price increases, indicating that exchange rate management is an important tool of monetary policy. The increase in gold holdings complements the policy goal of forint appreciation, both aimed at enhancing financial market stability and controlling inflation.

Summary

Hungary’s central bank considering an increase in gold holdings reflects an effort to optimize reserve asset structure amid complex external environments. Adjusting the ratio from 25.5% to a higher level is both a response to global central bank policy trends and a proactive measure to ensure national financial stability. While this strategic shift may not produce immediate market effects, in the long term it strengthens the central bank’s commitment to financial stability and provides a more solid asset backing for the forint. Attention should be paid to the specific timeline and extent of adjustments, as these will be key indicators of policy strength.