RBI buys 24 tonnes of gold in 4 months, 1.5 times more than all of 2023; know why it is stocking up

The Reserve Bank of India (RBI) has added as many as 24 tonnes of gold to its stock of reserves in just four months from January to April this year. This is almost 1.5 times the volume added throughout 2023, which was 16 tonnes.  

As per the latest released data by the RBI, the bank held 827. 69 tonnes worth of gold as a part of its foreign exchange reserves as of April 26, 2024, up from 803.6 tonnes as of end of December last year.

The gold has been added to RBI’s stock of reserve as a hedge against volatility amid geopolitical tensions and in challenging times, is considered to be a component of strategic reserve diversification.

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Despite India being one of the major consumers of the yellow metal at the household level, the RBI, so far, has remained less active in accumulating gold reserves. Back in 1991, the central bank faced criticism when it had pledged a portion of gold reserves during the foreign exchange crisis. Though all the gold is back in the our banks’ coffers, India only began purchasing gold from the market and added to its stock only from December 2017 onwards.

The RBI actively began buying gold from the markets in 2022, low in 2023, it returned with vigor in January 2024.  

The share of gold in the total foreign exchange reserves surged from 7.75 per cent at the end of December 2023 to about 8.7 per cent at the end of April 2024. In addition to volumes, RBI is also making valuation gains due to steady increase in the prices of gold.  

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Like most other central banks, the RBI too is diversifying its reserves as a hedge against currency volatility.  

“The heightened global uncertainty is sending emerging market central banks on a spree of buying gold, adding 290 tonnes in the first quarter of 2024 and accounting for a quarter of overall global gold demand” an assessment of the state of the economy by the RBI published in its latest monthly bulletin stated.

“Amid geopolitical developments and a slowing global economy, these central banks are signaling that living in challenging times calls for strategic diversification”, it further mentioned.