iNDICA NEWS BUREAU-
The Reserve Bank of India (RBI) has aggressively ramped up its gold reserves in 2024, acquiring a significant 24 tons in just four months (January-April) as a safeguard against global economic and political volatility. This marks a sharp increase compared to 2023, during which the RBI only added 16 tons of gold to its reserves to augment its foreign exchange reserve.
This strategic move reflects the RBI’s efforts to diversify its foreign exchange reserves amid challenging times. As of April 26, 2024, the RBI’s gold holdings climbed to 827.69 tons, up from 803.6 tons at the end of 2023, reflecting a previous addition of 16 tons.
While India is home to the world’s largest gold-loving population, its central bank has historically approached the precious metal with caution. The RBI faced criticism for pledging a large portion of its gold reserves during a foreign exchange crisis in 1991. Though the gold was eventually reacquired, the RBI only began actively acquiring from December 2017 onwards, coinciding with the tenure of the incumbent Narendra Modi government, which assumed power in 2014. After a period of increased procurement in 2022, activity waned in 2023 before witnessing a surge this year.
This tactical shift by the RBI aligns with a global trend observed among emerging market central banks, seeking to mitigate currency fluctuations. Beyond just adding volume, the RBI is also benefiting from rising gold prices. A report by the RBI’s economists highlights the “spree of gold buying” by emerging markets, with a staggering 290 tons added in the first quarter of 2024 alone, constituting a quarter of global gold demand. This diversification is deemed crucial amidst geopolitical tensions and a decelerating global economy.
The proportion of gold in India’s overall foreign exchange reserves increased from 7.75 percent at the end of December 2023 to approximately 8.7 percent by the end of April 2024. Alongside the rise in volume, the RBI is also profiting from valuation gains attributable to the steady rise in gold prices.
Gold’s enduring reputation as a reliable “store of value” renders it a valuable asset during periods of uncertainty. The World Gold Council recognized gold’s efficacy in crisis situations and its diversification advantages in 2023. With global uncertainty persisting in 2024, the rationale for holding gold remains as pertinent as ever.
