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RBI Gold Reserves

Context:

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.

Relevance:

GS III: Indian Economy

Dimensions of the Article:

  1. RBI Gold Reserves: Total and Recent Purchases
  2. RBI’s Motivation for Hoarding Gold
  3. Main Banks Buying Gold

RBI Gold Reserves: Total and Recent Purchases

Total Reserves:
  • 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.
Recent Purchase:
  • 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


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