RBI Adds 24 Tonnes Of Gold To Foreign Exchange Reserves In Just Four Months

The Reserve Bank of India accumulated 24 tonnes of gold to its foreign exchange reserves coffers till April this year as a part of a strategic diversification of reserves amid geopolitical tensions. As of April 26, the central bank approximately held 827.7 tonnes of gold in its foreign exchange kitty, higher than 803.6 tonnes as at the end of December, according to the RBI data.

Heightened uncertainty due to geopolitical tensions in west Asia and Russia compelled the RBI as well as other central banks of emerging markets to expand their gold reserves against currency volatility. The "spree of gold buying" led to the addition of 290 tonnes in the first quarter of 2024 and accounting for a quarter of overall global gold demand, it said in its latest monthly bulletin.

It makes for a feasible choice for central banks as gold acts as a natural hedge against price volatility. Indian consumers habitually purchase gold jewellery, especially during the festive season. But that aside, the RBI has been progressively buying gold in the last few years.

The share of gold in the total foreign exchange reserves has risen to about 8.7% at the end of April from 7.75% by the end of 2023. A persistent rise in gold prices have also resulted in valuation gains for the RBI. "Amid geopolitical developments and a slowing global economy, these central banks are signalling that living in challenging times calls for strategic diversification," it said.