Central Bank of BiH increases gold holdings in its foreign currency reserves

As of the end of February this year, the share of monetary gold in CBBH's total foreign exchange reserves is about 3.5 percent.

"This amount is the largest quantity of monetary gold that the CBBH has ever held since its establishment. The share of monetary gold in total foreign exchange reserves is influenced by the market value of gold, which is a fluctuating category, as well as the overall level of foreign exchange reserves, which changes daily depending on the demand for the domestic currency," CBBH representatives stated.

They added that due to legal limitations, the CBBH has a limited number of instruments in which it can invest its foreign exchange reserves, and it was assessed that gold, even with a relatively small share, contributes to diversification. Gold, as an asset preferred for protection against geopolitical and financial risks, positively contributes to portfolio diversification, which aims to protect against financial and credit risks.

The amount of gold that the CBBH can hold in its portfolio is determined in accordance with the legal framework and strategic orientation. According to the CBBH's strategic orientation, based on the estimated level of market risk that the central bank, operating under a currency board arrangement, can assume, it was assessed in 2024 that there is room to increase the share of monetary gold in the foreign exchange reserve portfolio. Accordingly, the CBBH purchased additional gold.

"The price of gold, with occasional short-term corrections, has been growing. As gold is perceived as a safe asset for protection against geopolitical and economic instabilities, and due to concerns over trade tensions and potential global recession, investors are increasingly investing in it, which supports the rise in its price," said CBBH representatives.

They emphasized that the CBBH carefully monitors financial market movements and will, as always, make future decisions based on legally prescribed limitations and all other relevant factors.

Adnan Rovčanin, a professor at the Faculty of Economics at the University of Sarajevo, stated that gold is one of the safest forms of investment, especially in conditions of risk and uncertainty, such as those currently present in the world.

"This is one of the key reasons why, in times of heightened risk and uncertainty, investors 'flee to gold.' As a result, the demand for gold has significantly increased, and the price has reached historic highs," Rovčanin noted.

Generally, he added, investing in gold is worthwhile, as evidenced by the historical trend of rising gold prices, with fluctuations caused by global economic, political, and other movements.

The expert team at the Central Bank of BiH, led by Governor Jasmina Selimović, has certainly used relevant information to prepare a detailed analysis of the current situation, as well as estimates of future global trends, which are crucial for gold price movements.

"Therefore, I am confident that the CBBH's decisions are optimal and rational. This is an 'active approach' to managing the Central Bank's portfolio – rebalancing the portfolio in line with market and other changes," Rovčanin added.

The price of gold rose by a further 0.6 percent on Friday, reaching a record $3,073 per ounce. Due to uncertainty in financial markets, the price of gold has increased by more than 17 percent since the beginning of the year, on track for the largest quarterly jump since 1986.