Context: The Reserve Bank of India’s (RBI) gold reserves touched 794.64 metric tonnes in fiscal year 2022-23, an increase of nearly 5% over fiscal 2022, when it held 760.42 metric tonnes of gold.
How Much Gold has RBI Purchased?
- Between the fiscal year ended June 30, 2019 (the RBI used to follow the July-June accounting year then; this was changed to April-March starting 2020-21) and fiscal 2023, the RBI’s gold reserves swelled by 228.41 tonnes.
- As on March 31, 2023, the country’s total foreign exchange reserves stood at $578.449 billion, and gold reserves were pegged at $45.2 billion.
- In value terms (USD), the share of gold in the total foreign exchange reserves increased from about 7% at the end of March 2022 to about 7.81% at the end of March 2023. It was 7.06% as of end-September 2022.
Reasons for Accumulation of Gold
- Diversification: Gold is considered a more safe, secure, and liquid asset. It also safeguards returns amid global uncertainty and a rising inflation scenario.
- Driving factors: Negative interest rates in the past, the weakening of the dollar and growing geopolitical uncertainty.
- Gold offers long-term store of value and is a high performing asset during the times of crisis as this year was scarred by geopolitical uncertainty and rampant inflation.
- As the Central bank buying gold remains robust, there is little to indicate that this will change in the short term.