Recent gold purchases by the Reserve Bank of India have strengthened the nation's foreign exchange reserves, reversing a sharp decrease of $47 billion over five weeks brought on by large withdrawals by foreign portfolio investors.
According to the most recent data from the Reserve Bank of India, the value of foreign currency holdings fell incrementally by $1.1 billion from the beginning of the fiscal year 2024–25 and November 15. Nonetheless, during the same time period, the value of gold in reserves rose by $13 billion, which helped to boost total foreign exchange reserves by $11 billion. Gold, foreign currency assets, and SDRs are among the $658 billion in reserves as of right now.
According to the most recent figures, the Reserve Bank of India (RBI) increased its gold holdings from 822.09 tonnes to 866.65 tonnes between March 29 and October 25 of this year, adding 44.76 tonnes to its reserves.
According to the World Gold Council, gold prices rose by 23% over this time, and the value of the RBI's gold holdings increased by 31%. The council ascribes this pattern to increased central bank demand, which has propelled a surge in gold prices and led to notable appreciation in value. Central banks' emphasis on asset safety in the face of growing geopolitical unpredictability has increased their interest in gold as a safe reserve option.
Since December 2017, the Reserve Bank of India has been gradually growing its gold holdings as part of its reserves management strategy. But since the COVID-19 epidemic, the RBI has increased the pace of its gold purchases and established itself as one of the world's top buyers.
The main reason the central bank keeps gold on hand is to diversify its foreign exchange holdings and use it as a hedge against inflation and the potential risks of currency fluctuations. The RBI and other central banks across the world have started buying gold more frequently since the start of the conflict between Russia and Ukraine in February 2022. Market analysts predict that this trend of rising gold accumulation will last till 2025.
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