RBI buys gold after 5 months for forex reserves; total holding at 625 tonnes

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The Reserve Bank of India (RBI) bought 7.5 tonnes of gold in October 2019 for adding to its foreign exchange reserves, which swelled to $461 billion, including $28 billion in gold. The purchase was made after five months, the World Gold Council (WGC) said.

The RBI now holds 625.2 tonnes of gold or 6.6 per cent of its forex reserves.

World Gold Council council released a report on total gold holdings by global central banks recently. It was based on data provided by them on gold buying to the International Monitory Fund (IMF).

The RBI is still a small player in international gold buying among central banks. But in terms of total gold bought in 2019, it is the sixth largest buyer with 25.2 tonnes purchases in the first 10 months of 2019.

China, Russia, Kazakhstan, Turkey, Poland bought more gold than India in 2019. Total gold purchased by central banks from January to November 2019 was 570 tonnes.

The RBI buys gold to hedge the government’s sovereign gold bond issue, launched in November 2015. “In November, central banks reported adding 27.9 tonnes on a net basis. On a year-to-date basis, this brings cumulative net purchases to 570.2 tonnes, 11 per cent higher than the same period in 2018 (515.2 tonnes),” according to the WGC.

In 2019, Uzbekistan and Venezuela were among sellers which sold 16.6 and 30.3 tonnes, respectively.

Apart from central banks, institutional investors buying gold exchange-traded funds have emerged the second highest buyers of gold in 2012. Share of retail demand for jewellers and investments continues to be high, but there has been a jump in ETF purchase in 2019, which stood at 400 tonnes.

WGC said in its latest data analysed for ETFs that, “Gold-backed ETF inflows alongside central bank purchases were a large driver of global gold demand in 2019.”

Shekhar Ghosh is a communications consultant and and former journalist, who has edited and written for publications such as like Business India, Business Standard, Business Today and Outlook.

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