RBI increases gold reserves amid global geopolitical uncertainty

RBI: Experts say that the recent global perturbation necessitates that reserves be diversified away from volatile foreign currency investments.

RBI’s Gold Reserve Increase:

The Reserve Bank of India (RBI) has increased its gold reserves by around 1 percent in 2024, according to recent data.

This increment is a strategic move to diversify and safeguard the nation’s forex reserves amid a volatile global geopolitical landscape.

Current Gold Reserves:

As of June 7, 2024, RBI’s gold reserves stood at $56.982 billion, constituting 8.69 percent of the total reserves. This marks an increase from December 29, 2023, when gold reserves were $48.328 billion, or 7.76 percent of the total reserves.

Expert Opinions:

Amit Pabari, Managing Director at CR Forex, explained that gold’s historical stability during geopolitical crises makes it a valuable asset for central banks aiming to protect their reserves.

Similarly, Anindya Banerjee, SVP and Head of Research-Currency, Commodity, and Interest Rates at Kotak Securities, highlighted the importance of maintaining diversification away from foreign currency assets.

Geopolitical Factors:

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The increase in gold reserves is driven by global uncertainties, including trade tensions, political instability, and conflicts such as the Russia-Ukraine war. These factors necessitate a more secure and diversified reserve strategy for central banks worldwide.

Recent Gold Repatriation:

In a significant move last month, RBI repatriated over 100 tonnes of gold stored in the UK, a scale of addition last seen in 1991.

This step is part of a larger strategy to enhance the central bank’s gold holdings, with similar quantities expected to be added in the coming months for logistical and storage diversification purposes.

Global Trends:

The trend of increasing gold reserves is not unique to India. Central banks globally have been augmenting their gold holdings, with the RBI alone adding 27.5 tonnes during the fiscal year 2023.

By the end of March, the RBI’s total gold reserves amounted to 822.1 tonnes, of which 413.8 tonnes were stored overseas.

Conclusion:

RBI’s strategic increase in gold reserves underscores the importance of gold as a stable and secure asset amidst global geopolitical uncertainties. By diversifying its reserves, the RBI aims to fortify the country’s economic stability against unpredictable international events.