The Reserve Bank of India added 24 tonnes of gold to its stock of reserves in four months from January to April this year as a hedge against volatility amid geopolitical tensions. This is reckoned to be a part of strategic diversification of reserves in challenging times.
This is almost one and a half times the volume it did during the whole of 2023 when it added 16 tonnes to its reserves an analysis of the Reserve Bank data indicates.
The Reserve Bank held 827. 69 tonnes worth of gold as a part of its foreign exchange reserves as of April 26,2024, up from 803.6 tonnes as of end December according to the latest Reserve bank of India data.
Though India has been one of the largest consumers of gold as far as the Indian household is concerned, the country’s central bank was rarely active in piling its gold reserves. It came in for heavy criticism when it had pledged a part of its gold reserves in 1991 when it faced foreign exchange crisis. Though all the gold is back in the central bank’s coffers, it started adding to its stocks from market purchases only from December 2017. Though it was seen actively buying from the markets in 2022, it was lying low in 2023 only to come back aggressively since January this year.
The share of gold in the total foreign exchange reserves increased from 7.75 per cent as at end- December 2023 to about 8.7 per cent as at end-April 2024. In addition to volumes, the central bank is also making valuation gains because of steady increase in gold prices. The Reserve Bank, like most other emerging market central banks, is diversifying its reserves as a hedge against currency volatility. “ The heightened global uncertainty is sending emerging market central
banks on a spree of gold buying, adding 290 tonnes in the first quarter of 2024 and accounting for a quarter of overall global gold demand” said an assessment of the state of the economy by the Reserve bank economists published in its latest monthly bulletin.
“ Amid geopolitical developments and a slowing global economy, these central banks are signaling that living in challenging times calls for strategic diversification”, it said.
As an asset gold’s age-old credential is in its character as ‘store of value”. “ Last year central banks placed great emphasis on gold’s value in crisis response, diversification attributes and store-of-value credentials” said a senior analyst at the World Gold council a in note. “ A few months into 2024 the world seems no less uncertain meaning those reasons for owning gold are as relevant as ever”.
