The Reserve Bank of India has purchased over 40 tonnes (average) of gold over the past five years (2019-2023), a recent report highlighted.
The data released by the PHD Research Bureau, compiled from World Gold Council highlighted the gold purchase trend by the RBI over last 5 years.
In 2023, RBI purchased only 16 tonnes of gold which marked a significant fall as compared to 33 tonnes purchased in 2022, it said.
However, the trend seems to be overturning in 2024, as the RBI added 24 tonnes of gold to its stock of reserves in four months from January to April this year.
This is almost one and a half times the volume it did during the whole of 2023 when it added 16 tonnes.
According to the latest RBI data, it 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.
The five year analysis
The amount of gold purchased by the Reserve Bank of India (RBI) in 2023 marked a continuous declining trend reflecting an improved confidence in the stability of the financial system.
In 2022, 33 tonnes of gold was purchased, marking a notable decrease from 77 tonnes in 2021.
Overall, the purchase of gold by the Central Bank of India reflects a dynamic approach to reserve management, influenced by a range of economic and geopolitical factors.
The share of gold in the total foreign exchange reserves increased from 7.75% as at end- December 2023 to about 8.7% as at end-April 2024.
In addition to volumes, RBI is also making valuation gains because of steady increase in gold prices.
Supply of gold in India
In 2019, India imported 827 tonnes of gross gold bullion, scrap produced 120 tonnes of gold, and domestic production was 11 tonnes.
The Covid-19 affected consumer demand across all major components including jewellery and bar and coin. The total gold supply declined to 454 tonnes because of the decline in gross bullion imports.
In 2021, the gold bullion imports recovered by 60% to 1003 tonnes in 2021 from 400 tonnes in 2020. In 2022 and 2023, the gross bullion imports moderated at around 773 tonnes.
The report further highlighted that the domestic gold production depicts a 56% increase from 7 tonnes in 2021 to 16 tonnes in 2023.
Thus, the total supply surpassed and peaked in 2021, accounting for 1003 tonnes of bullion imports out of the total 1007 tonnes supply.
In 2023, the total supply increased by 10% from 777 tonnes in 2019 to 857 tonnes in 2023.
Remarkably, the gross bullion imports have declined whereas domestic gold production has increased.
