The Reserve Bank of India’s (RBI) gold reserves touched 794.64 metric tonnes in fiscal 2023, an increase of nearly 5 per cent over fiscal 2022, when it held 760.42 metric tonnes of gold.
GS III: Indian Economy
Dimensions of the Article:
- RBI Gold Reserves: Total and Recent Purchases
- RBI’s Motivation for Hoarding Gold
- Main Banks Buying Gold
RBI Gold Reserves: Total and Recent Purchases
- RBI holds 437.22 tonnes of gold overseas with the Bank of England and the Bank of International Settlements (BIS), and 301.10 tonnes domestically.
- As of March 31, 2023, India’s total forex reserves were $578.449 billion, with gold reserves at $45.2 billion.
- The value of gold in the total forex reserves increased to about 7.81% at the end of March 2023.
- RBI purchased 34.22 tonnes of gold in FY 23 and 65.11 tonnes in fiscal 2022.
- From FY 2019 to FY 2021, RBI’s gold reserves were 228.41 tonnes.
- The RBI is one of the top five central banks buying gold, according to the World Gold Council’s regional CEO for India.
RBI’s Motivation for Hoarding Gold
- When the RBI has foreign currency in its reserves, it invests them to purchase US Government bonds and earn interest.
- However, the real interest on these bonds has turned negative due to the rise in inflation in the US.
- During such inflationary periods, demand for gold has increased, and holding gold can provide good returns even in stressed economic situations.
- Due to uncertainties arising from geopolitical conflicts like Russia-Ukraine and US-China, there has been a decline in the acceptance of the US dollar by some prominent global suppliers of goods.
- Holding dollars can lead to losses for the RBI if they depreciate against other currencies.
- Gold, with its intrinsic value and limited supply, can retain its value longer than other currencies.
- Gold is a safer, more secure, and more liquid asset that performs well during times of crisis and serves as a long-term store of value.
- Gold has a transparent international price and can be traded anytime.
Main Banks Buying Gold
- According to the WGC, central banks of emerging market economies are the main buyers of gold.
- The People’s Bank of China (PBoC) reported the first increase in its gold reserves since September 2019 in 2022, with total purchases of 62 tonnes in November and December.
- The Central Bank of Turkey reported the largest buying in 2022, with its gold reserves rising by 148 tonnes to 542 tonnes, the highest level on record.
- Central banks from the Middle East, including Egypt, Qatar, Iraq, the UAE, and Oman significantly boosted their gold reserves in 2022.
- The Central Bank of Uzbekistan ended 2022 as a net purchaser of gold, with its gold reserves rising by 34 tonnes.
- In January-March 2023, the Monetary Authority of Singapore was the largest single buyer of gold, adding 69 tonnes to its gold reserves.
- The WGC expects central bank buying of gold to remain robust in the short term.
-Source: Indian Express