‘Central Bank must explain €340m spend to double State gold reserves’

FINANCE Minister Paschal Donohoe faces calls to explain to the Dáil why the normally fiscally conservative Central Bank has doubled Ireland’s gold reserves.

The decision of the Central Bank to splash out an estimated €340m buying six tonnes of gold in the first quarter of 2022 has sparked political alarm over the message it could send about the country’s economic prospects, Independent TD Carol Nolan maintains.

In a low-key move and after a decade of keeping Ireland’s

‘They are preparing for turbulent times’

gold reserves at a cautious six metric tonnes, the bank – in a single quarter this year – dramatically doubled its reserves to 12 tonnes.

Ireland’s stocks of gold are now worth €680m in a rapidly rising market.

A metric tonne of gold consists of 1,000 kilograms or 2204.62 pounds and costs approximately €56m.

Responding to questions from Deputy Nolan, Finance Minister Paschal Donohoe confirmed the bank had doubled its gold holdings.

‘The stocks of gold are primarily in the form of gold bars but also include a small amount of gold coin,’ he said.

Commenting on the unusual move, Deputy Nolan called for a public explanation from the finance minister, noting that: ‘On the one hand, it could be the case that the doubling of reserves is a prudent and appropriate measure.

‘But the substantial purchase of €340m of gold may also signal a degree of unspoken alarm around the possibility of a significant financial or currency crisis emerging in the near future.

‘If this is the case, then Government should clearly be alerting us to this possibility so that we can have a full and open debate on the matter,’ the deputy added.

The finance minister said the bank had increased its holdings of physical gold during 2021 and early 2022 as part of ‘the diversified longer-term investment strategy for the discretionary investment assets, aimed at improving balance sheet resilience’.

Amidst growing uncertainty about the global economic future, the price of gold has spiralled in recent months.

One senior economic source said: ‘Purchasing gold sends a warning message, gold is the classic flight stock, the market turning to gold is like holding the hand of nurse for fear of finding something worse.

‘We have had Brexit, the coronavirus and the Ukraine war, so gold, unsurprisingly, has gone through the roof.

‘Obviously, no matter what they say, the bank is nervous, they are preparing for turbulent times,’ the economic source added.

Despite the current Brexit tensions, Ireland’s gold reserves will continue to be stored in Britain.

‘That amount of gold will be stored in the Bank of England.

‘They have massive vaults, they store gold for several European countries,’ said an informed source.

Séamus Fahy from Merrion Gold, Ireland’s leading gold providers, told the Irish Mail on Sunday that the Central Bank’s 12 tonnes will, despite the value, take up less space than might be thought.

Mr Fahy said ‘Central banks typically hold gold in the form of 12.5kg gold bullion bars.

‘The approximate dimensions of each of these gold bars is 27.2cm long x 9.45cm wide x 5.1cm in depth.

‘Due to the compact nature of gold, storing a quantity of this significance wouldn’t take up as much space as one might think,’ he added.

Some of the reasons for the purchase he said is that ‘the Central Bank may be increasing their holdings including portfolio diversification or risk management’.