RBI Stocks Up On Gold, Brings More Home As Geopolitical Conditions Continue To Worsen

The Reserve Bank of India now holds 854.73 metric tonne of gold as of September-end 2024, according to the half-yearly report on the management of foreign exchange reserves, published on Tuesday. This is compared to 822.10 metric tonne of gold as of March 2024.

Of this, 510.46 metric tonne was held domestically, compared to 408.31 metric tonne held as of March 2024. Around 324.01 metric tonne of gold was kept in safe custody with the Bank of England and the Bank for International Settlements, compared to 387.26 metric tonne as of March 2024.

Rising gold holding of RBI is a forward signaling of risk off sentiment of the central bank amid geopolitical conflict, higher inflation environment and sticky interest rate regime, explained Dipanwita Mazumdar, economist at the Bank of Baroda.

Gold has been persistently preferred as an effective hedge and building up of a safe haven buffer, she explained. The fact that RBI is resorting more towards gold is also a testimony to the fact that it expects a volatile dollar going forward in the run up to the US election, she added.

In value terms too, the share of gold in the total foreign exchange reserves increased from 8.15% at the end of March 2024 to about 9.32% in September 2024.