MUMBAI: The Reserve Bank has added as much as 204 tonne of gold in the past years ending March 2024—from 618.2 tonne in March 2019 to 822.1 tonne as of March 2024, in spite of the fact that the bullion price has skyrocketed during this period to the tune of 70 per cent.
The biggest addition has been in March-April of 2024 when it added a little over 24 tonne, which is as much as 150 per cent more than what it had purchased in the whole of FY2023, the monetary authority has added 16 tonne to the reserves, according to sources.
According to the RBI annual report released yesterday, the central bank added 27.5 tonnes in fiscal 2024.
The vastly changing tonnage clearly indicate that the monetary authority has been consistently increasing the gold reserves-- from 618.2 tonne in 2019 rose to 661.4 tonne in 2020, and adding almost 35 tonne more in the pandemic ravaged 2021 taking the total to 695.3 tonne, further increasing it to 760.4 tonne in 2022, taking it to 794.6 tonne in 2023 and further increasing it 822.1 tonne by the first four months of 2024—net adding 203.9 tonne, even though gold price has been the highest on record crossing $2430 an ounce in April 2024.
It is not known the average price of these additions, though. Anyway, the World Gold Council has been repeatedly saying bullion prices are skyrocketting primarily because of the huge demand from central banks led by those of China and RBI and not consumer demand, this had last week the metal crossing the $2450/ounce mark. Almost a third of the gold demand in 2024 has been snapped by the central bank, according to the global bullion lobby.
The monetary authority buys gold to increases its reserves as part of its forex reserve management strategy which is to maintain a hedge against volatility amid geopolitical tension and also a part of the strategic diversification of reserves in challenging times.
Of the close to $650 billion of forex reserves, the RBI typically parks two-thirds in overseas government securities, primarily in the US treasury bills, along with some other key government bonds, and around 15 per cent in gold.
Meanwhile, the central bank has reportedly shipped back 100 tonne of gold from the Bank of England’s vaults in recent months, as part of its reserve management strategy.
It can be recalled that first such shipment took place in early 1991, when the then Chandrashekar government was to forced to pledge 47 tonne of gold with the IMF for a loan to tide over a serious balance of payment crisis.
In fact, the RBI under the imperial rule also had been keeping a portion of its gold, then the gold standard—a central bank could print only those much money against which it has an equal measure of gold in its reserves-- was in place.
Since then the central bank has been keeping a good portion of the reserves offshore, even as it has been adding on to the reserves and the reported shipping in of 100 tonne, which it had bought in recent months in part of this resources management strategy only.
The RBI’s gold reserve management has been keeping a little over 50 per cent in overseas vaults primarily that of the Bank of England and the rest in domestically which are reportedly safe-kept at Mumbai and Nagpur vaults.
In fact, the biggest gold purchase was 2009 when the RBI snapped up as much as 200 tonne form the IMF.
On the reported shipping in of 100 tonne of the 822.1 tonne gold from the overseas vaults, Sanjeev Sanjyal, a member of the PM’s economic advisory council, said the move shows how the country has come a long way from the 1991 crisis.
“While no one was watching, RBI has shifted 100 tonne of its gold reserves back to India from England. Most countries keep their gold in the vaults of the Bank of England or some such locations and pay a fee for the privilege. India will now hold most of its gold in its own vaults. We have come a long way since we had to ship out gold overnight in 1991 in the midst of a crisis,” he said in the social media platform X.