The Reserve Bank bought almost six tonnes of gold and likely sold $ 7 billion worth US treasury securities this April in what seems to be its strategy of diversifying its forex reserves management.
The value of India’s – essentially the Reserve Bank of India’s – US treasury securities dipped $ 7.1 billion in April to take the value of outstanding US treasury securities’ (USTs) exposure to $233.5 billion at the end of the month, according to the data released by the US treasury department late on Tuesday.
In comparison, India bought about $ one billion worth of USTs in April of 2023 and the stock of gold was almost flat at 794 tonnes in the same period.
The RBI’s strategy is in line with that of the other major central banks globally who have been accumulating gold and discarding dollar denominated assets as the geopolitical tensions escalate. Foreign central banks have lowered their exposure to the USTs by $30 billion, the data released by the US Treasury department shows.
On the other hand, central banks globally bought a record 290 tonnes of gold in the January-March quarter with Chinese and Turkish central banks accounting for the maximum purchases during the quarter, data from the World Gold Council indicates.
The Reserve Bank has started to accumulate gold regularly from the market since December 2017, but has intensified its pace of accumulating over the past two years amidst rising geopolitical tensions following the war in Ukraine and the tension in West Asia. But it has been particularly aggressive since January this year. The central bank has bought another three tonnes of gold in May, taking its cumulative accumulation to 28 tonnes in the calendar year so far this year, the latest data indicates
A 2024 Central Banks Gold Reserve Survey conducted by the World Gold Council concludes that the top three reasons to hold gold now include: gold’s long term value according to 88 percent of respondents, performance during crisis said 82 percent of the respondents and its role as an effective portfolio diversifier according to 76 percent of the respondents.
As for the Reserve Bank’s intent of accumulating gold, the central bank’s stated objective of holding gold in reserves is mainly to diversify its foreign currency assets base, as a hedge against inflation and foreign currency risks
“We are building up gold reserves, the data is released from time-to-time” said RBI governor Shaktikanta Das at the post policy media conference on April 5. “All aspects while building up the reserves are assessed and then we make a decision.”
