The Reserve Bank of India
(RBI) has added 2.5 tonnes of gold
to foreign exchange reserves for the quarter ended March 2018 in two tranches.
This is the first such addition after 2009, when the central bank bought 200 tonnes of the yellow metal from the International Monetary Fund (IMF) at $1,032 per tonne. According to IMF data (updated till March 2018), India’s gold
holding in forex
reserves rose to 560.3 tonnes by the end of March 2018. The RBI
did not respond to email queries till the time of going to press.
“The addition looks like a pilot purchase. The net impact is that reserves are up marginally. This is not significant and does not imply strategic addition, unless we see a creeping acquisition trend,” a source said. “This was a decision taken by the government before the Budget presentation. But due to the sensitivity of the issue, it was not announced,” another source added.
Globally, central banks, including in Russia and Turkey, add gold
reserves to hedge against the dollar. The Turkish central bank announced a policy in May 2017, replacing the dollar as a prominent asset in its foreign exchange reserves. Turkey’s commercial banks also hold huge gold
These are placed with the central bank under the reserve option mechanism. The country is the 11th largest gold-holding country in forex
reserves at 595.5 tonnes. Russia has been buying over 200 tonnes of gold
per year since the last three years to add to its forex
reserves and reduce dollar dependence. Its reserves are bigger than China’s, making them the sixth largest in the world. Russia and China buy most of their gold
locally since they are prominent gold
According to sources, India could add gold
mobilised by the Gold
Monetising Scheme to its forex
reserves. The RBI
was likely to have purchased gold
in March from two London-based banks, they added.
buying by central banks has been on the rise in the last few years, with 350 to 400 tonnes of gold
being bought annually. China buys gold
locally, but announces with a lag. However, according to GFMS Thomson Reuters, China will buy gold
this year to add to its reserves after two years.