RBI’s overseas gold holdings drop, guv cites domestic storage capacity as cause behind repatriation  

The RBI’s strategic adjustments reflect a broader movement towards securing national assets amid global economic uncertainties, reinforcing gold’s enduring value as a secure and stable investment 

Mumbai — The Reserve Bank of India’s (RBI) gold reserves held overseas have plummeted to their lowest level in six years, comprising only 47% of the total gold reserves as of the end of March. This marks a major shift since the RBI began accumulating gold in December 2017. 

By the end of March 2024, the RBI’s total gold holdings amounted to 822.1 tonnes, with a significant amount reserved in foreign vaults. Last month, reports surfaced that the RBI had repatriated 100 tonnes of gold from the UK to India. Governor Shaktikanta Das clarified that the decision was based on sufficient domestic storage capacity, advising against reading further into the move. 

The decision to bring gold back to India began in March 2022, coinciding with the onset of the Russia-Ukraine conflict. This aligns with a global trend among central banks, which have become more cautious after the US government froze Russian foreign currency assets following the conflict’s outbreak in February 2022.  

The RBI’s strategic adjustments reflect a broader movement towards securing national assets amid global economic uncertainties, reinforcing gold’s enduring value as a secure and stable investment. 

Primarily, India’s gold reserves are stored in the Bank of England, which is known for its stringent security protocols. Apart from this, the RBI also stores some of its gold reserves at the Bank for International Settlements (BIS) in Basel, Switzerland, and the Federal Reserve Bank of New York in the United States. 

A December 2023 survey conducted by global investment manager Invesco, which included 57 central banks and asset managers, revealed a notable trend: central banks had increased their gold exposure 8-10 years ago, predominantly keeping it in London for swaps and yield enhancement. However, they are now repatriating these reserves, emphasizing gold’s role as a safe-haven asset. According to the survey, the share of gold reserves held domestically by central banks rose from 50% in 2020 to an estimated 68% by December 2023, with projections indicating this could increase to 74% within the next five years. 

Interestingly, Central Banks across the globe are likely to buy more gold over the next 12 months, according to the World Gold Council (WGC), which has completed the 2024 Central Bank Gold Reserves Survey. Central banks have been significant buyers of gold in recent years amid both economic and geopolitical uncertainty. 

The WGC survey received responses from a record-high 70 central banks. The survey shows that Central bank sentiment towards gold remains very high, with 29 per cent saying they will add more gold in the next 12 months and 81 per cent saying that official sector gold reserves overall will grow in the same period. 
 

Optimism towards gold’s future role in global reserves continues to grow, with 69% saying that gold’s share of reserves will be higher in five years compared to 62% last year, the WGC survey said. 

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