The Reserve Bank of India held 827.69 tonnes of gold in April 2024 as part of its foreign exchange reserves, up from 805 tonnes at the end of December 2023, according to the latest RBI data. This increase is part of a strategic move to hedge against volatility amid geopolitical tensions, reflecting a broader effort to diversify reserves in challenging times.
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The Reserve Bank of India (RBI) has significantly increased its gold reserves, adding 24 tonnes between January and April 2024. This move is part of a strategic diversification of reserves aimed at mitigating risks amid ongoing geopolitical tensions and economic uncertainty. This increase is almost one and a half times the 16 tonnes of gold added throughout 2023, as per an analysis of RBI data.
As of April 26, 2024, the RBI held 827.69 tonnes of gold as part of its foreign exchange reserves, up from 803.6 tonnes at the end of December 2023. This marked increase underscores the central bank’s proactive approach in enhancing its gold reserves, reflecting a significant shift in its reserve management strategy.
Historically, while India has been one of the largest consumers of gold, primarily at the household level, the RBI has not always been active in accumulating gold reserves. The central bank faced heavy criticism in 1991 when it had to pledge a portion of its gold reserves during a foreign exchange crisis. Although all the gold was eventually reclaimed, it was only in December 2017 that the RBI resumed adding to its gold stock through market purchases.
The RBI’s renewed interest in gold is part of a broader trend seen among emerging market central banks. The share of gold in India’s total foreign exchange reserves increased from 7.75% at the end of December 2023 to about 8.7% by the end of April 2024. This rise is not just due to the additional volume but also the valuation gains from a steady increase in gold prices.
“Heightened global uncertainty is sending emerging market central banks on a spree of gold buying,” noted a recent assessment by RBI economists published in the bank’s monthly bulletin. In the first quarter of 2024 alone, central banks globally added 290 tonnes of gold, representing a quarter of the overall global gold demand. This surge highlights a collective move towards strategic diversification amid geopolitical and economic challenges.
The appeal of gold lies in its historical role as a ‘store of value’. In times of crisis, gold’s ability to maintain value makes it an attractive asset. A senior analyst at the World Gold Council noted, “Last year, central banks placed great emphasis on gold’s value in crisis response, diversification attributes, and store-of-value credentials. A few months into 2024, the world seems no less uncertain, meaning those reasons for owning gold are as relevant as ever.”
The RBI’s increased gold purchases since January 2024 signal a robust response to the prevailing uncertainties. By bolstering its gold reserves, the central bank aims to provide a buffer against currency volatility and safeguard the country’s economic stability. This strategic move aligns with the actions of other emerging market central banks, which are similarly seeking to enhance their resilience through diversified reserve portfolios.
In conclusion, the RBI’s substantial increase in gold reserves in the first four months of 2024 reflects a calculated strategy to hedge against global volatility. This move not only strengthens India’s financial security but also positions the country to better navigate the complexities of the global economic landscape. As uncertainties persist, gold’s enduring value as a secure asset continues to be a cornerstone of central bank strategies worldwide.
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