The Reserve Bank of India’s yen for gold seems unstoppable, notwithstanding the increase in price of the yellow metal.
This is underscored by the fact that the share of gold in India’s total foreign exchange (Fx) reserves increased from 8.15 per cent as at end-March 2024 to about 9.32 per cent as at end-September 2024 in value terms, following addition of 32.63 metric tonnes of the yellow metal by the Reserve Bank of India (RBI) during this period.
Further, the RBI preferred to park more gold within the country than outside. It held about 60 per cent of its gold reserves in safe custody in India as at September-end 2024 against about 50 per cent as at March-end 2024.
As at end-September 2024, the Reserve Bank held 854.73 metric tonnes of gold against 822.10 metric tonnes of gold as at March-end 2024, according to RBI’s “Half Yearly Report on Management of Foreign Exchange Reserves”.
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The share of gold in India’s total Fx reserves in value terms has been steadily rising over the last few years – from about 5.88 per cent as at end-September 2021 to about 7.06 per cent as at end-September 2022 to about 7.37 per cent as at end-September 2023 and to about 9.32 per cent as at end-September 2024.
According to World Gold Council (WGC) data, the price of gold as on April 1, 2024, was at $2,284.2 per Ounce. It rose to a high of $2,650.6, and was at $2,630 as at September-end 2024.
“The RBI accumulated 3 tonnes (or metric tonnes) of gold (in August 2024), its eighth consecutive month of net buying. This makes the RBI the second highest net purchaser of gold on a year-to-date basis, with net purchases of 45 tonnes, the World Gold Council said in a report earlier this month.
As at September-end 2024, RBI held 510.46 metric tonnes of gold domestically (408.31 metric tonnes as at March-end 2024). While 324.01 metric tonnes of gold (387.26 metric tonnes) were kept in safe custody with the Bank of England and the Bank for International Settlements (BIS), 20.26 metric tonnes (26.53 metric tonnes) were held in the form of gold deposits.
Forex reserves
During the half-year period under review, India’s forex reserves increased from $646.42 billion as at end-March 2024 to an all-time high of $705.78 billion as at end-September 2024.
Out of the total forex reserves as at September-end 2024, a chunk (about 87 per cent) was parked in foreign currency assets (securities, deposit with other central banks and the BIS, and deposits with commercial banks overseas).
RBI said with the objective of exploring new strategies and products in reserve management while diversifying the portfolio, a small portion of the reserves is being managed by external asset managers.
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