Context:
The Reserve Bank of India (RBI) added 57.5 tonnes of gold to its reserves in FY25, marking the second-highest annual purchase since it began accumulating gold actively in December 2017. This surge in gold accumulation comes amid heightened global geopolitical risks, US dollar volatility, and reduced appeal of US Treasury securities.
Key Highlights
Record Gold Holdings
- RBI’s total gold holdings reached 879.6 tonnes as of March 2025, up from 822.1 tonnes a year earlier.
- FY25’s purchase is only second to the 66 tonnes bought in FY22.
- Gold now accounts for 11.8% of India’s foreign exchange reserves (up from 8.7% last year).
Global Context Driving Gold Demand
- Volatile dollar, especially after Donald Trump’s re-election in November 2024, is making gold more attractive.
- Global central banks, facing uncertain returns on US Treasuries, are shifting towards gold for safety and inflation hedging.
- According to the World Gold Council, central banks remained pivotal to global gold demand in 2024.
Strategic Importance in Reserve Management
- RBI rarely sells gold, unlike many central banks, due to political sensitivities and strategic reserve policies.
- The central bank emphasized that safety and liquidity are its key reserve management goals, with return optimization being secondary.
Pattern Suggests Measured Strategy
- RBI’s buying pace slowed in December and February, dipping below the average of 6.6 tonnes per month seen between January–November 2024.
- This may signal a more calibrated approach, though it highlights gold’s growing strategic role in India’s reserves.
Valuation Gains
- RBI also benefited from a 30% surge in global gold prices, which boosted the valuation of its existing holdings.
