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Gold is being bought by central banks at an ever-increasing rate.
India is adding more gold to its $640 billion foreign exchange reserves. The Reserve Bank of India (RBI) has purchased 75.59 tonnes of gold in the last 12 months, significantly increasing the country’s gold holdings, according to a report in The Indian Express. According to Reserve Bank data, the central bank owned 743.84 metric tonnes of gold in September 2021, up from 668.25 tonnes in September 2020. The value of gold holdings, on the other hand, increased by only $960 million (about Rs 7,150 crore) from a year ago to $37.389 billion in September this year. Gold prices, which had surged to Rs 56,000 per 10 gm last year, had since plummeted below Rs 48,000 mark.
The Reserve Bank of India’s gold holdings has increased by 125.6 tonnes in the last two years, making India the world’s ninth-largest gold reserve holder.
According to the RBI’s Report on Management of Foreign Exchange Reserves, 451.54 metric tonnes of gold are held overseas in safe custody with the Bank of England and the Bank for International Settlements (BIS), whereas 292.30 tonnes are held locally. The share of gold in total foreign exchange reserves increased modestly in value terms (USD) from around 5.87% at the end of March 2021 to roughly 5.88% at the end of September 2021.
Despite the fact that gold no longer plays a direct role in the international monetary system, central banks and governments continue to retain large gold reserves in order to secure national wealth and avoid economic instability. Gold is being bought by central banks at an ever-increasing rate. They bought more gold in 2018 than they have in any year since the termination of the gold standard, and they have been net buyers for 11 years.
“Gold is now the world’s third-largest reserve asset, after US dollar and euro-denominated assets. Furthermore, gold, like other high-quality, liquid assets like government debt, is increasingly employed as collateral in financial transactions,” according to the World Gold Council.