Gold and other precious metals plunge, Poland considers selling gold to fund defense.

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Adam Glapinski, Governor of Poland’s central bank, proposed selling part of the country’s gold reserves to raise up to 48 billion zloty (about $13 billion) for defense spending. Following the announcement, precious metals prices dropped.

On Wednesday, Bloomberg reported that Glapinski put forward this plan during a meeting with President Karol Nawrocki. Nawrocki later announced publicly that he would seek alternatives to existing EU financing to inject funds into defense; he was critical of the EU’s €150 billion (about $174 billion) "European Security Action" loan-based arms procurement program.

According to Bloomberg, citing sources familiar with the matter, Glapinski proposed to the president that the National Bank of Poland could achieve this financing goal by selling part of its roughly 550 tons of gold reserves, and then buying the gold back after completing the financing. The core idea of the plan is to unlock funds through the spread or accounting gains from buying and selling gold, rather than permanently reducing the reserve size.

However, the plan has not yet disclosed specific operational details or a timetable; coupled with dual obstacles from domestic law and politics, whether it will ultimately be implemented remains uncertain.

Supply shock expectations disrupt market, hurdles remain for gold sales

Although Polish President Karol Nawrocki has provided political endorsement for the proposal to sell gold reserves to raise defense funds, the plan faces various legal, political, and practical constraints in actual implementation.

Bloomberg reports that Polish law strictly prohibits the central bank from directly financing the government, constituting the main legal barrier to this plan. Meanwhile, Prime Minister Donald Tusk has made it clear that he firmly supports using Poland’s €44 billion share of the EU "European Security Action" program loan, directly opposing the president’s call for alternative financing. As the president and prime minister belong to different political camps, their disagreements over defense funding add more uncertainty to the plan.

After the news was disclosed, the precious metals market experienced a short-term shock. Poland holds about 550 tons of gold reserves, which is considerable, and expectations of partial inflows into the market have created certain supply-side pressure. However, as the plan is still in the discussion stage, and is constrained by legal prohibitions and division between government branches, the actual implementation timing and likelihood remain highly uncertain.

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