After 5 months RBI buys gold, now holds 625 tonnes

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.

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 gold.

However, addition in the form of gold took place after five months (the last was in April), the World Gold Council (WGC) said.

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

The 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.”

Forex reserves rise by $58 million to record high of $461.21 billion

India’s foreign exchange reserves rose by $58 million to reach a life-time high of $461.21 billion in the week to January 10, according to the Reserve Bank of India (RBI) data. In the previous week, the reserves had increased by $3.689 billion to $461.15 billion.

In the reporting week, the reserves rose despite a decline in foreign currency assets (FCA), which is a major component of the overall reserves.

FCA decreased by $367 million to $427.582 billion, the RBI data showed. On the other hand, the Indian rupee furthered its losses for the second day, dropping 15 paise to close at 71.08 against the US dollar on Friday amid strengthening of the  US dollar overseas and rising crude prices. At the interbank foreign exchange market, the rupee opened lower at 70.98 to the US dollar and touched a low of 71.10. It finally settled at 71.08.

Photograph: Ajay Verma/Reuters.