RBI stocks up gold reserves: From January to April 2024, the Reserve Bank of India (RBI) added 24 tonnes of gold to its reserves, a strategic move to hedge against volatility amidst geopolitical tensions. This addition is significantly higher than the 16 tonnes added throughout 2023, as per the analysis of RBI data.
According to an ET report, as of April 26, 2024, the RBI held 827.69 tonnes of gold as part of its foreign exchange reserves, an increase from 803.6 tonnes at the end of December. The increase in gold reserves is almost 1.5 times the volume added in the whole of 2023.
Although India has been a major consumer of gold at the household level, the central bank has so far been less active in accumulating gold reserves. The RBI faced criticism in 1991 when it pledged a portion of its gold reserves during a foreign exchange crisis.
RBI started adding to its stocks through market purchases from December 2017, with a more aggressive approach in 2022 and a resurgence in buying activity since January 2024.
The share of gold in the total foreign exchange reserves rose from 7.75 per cent at the end of December 2023 to approximately 8.7 per cent by the end of April 2024. Along with the increase in volumes, the central bank is also benefiting from valuation gains due to the steady rise in gold prices.
Like many other emerging market central banks, the RBI is diversifying its reserves to 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,” according to an assessment of the state of the economy by RBI 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 added.
Gold’s long-standing credential as a “store of value” asset is particularly relevant in the current context. “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 in a note. “A few months into 2024, the world seems no less uncertain, meaning those reasons for owning gold are as relevant as ever.”
