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March 22, 2002 | 1240 IST
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RBI rules out selling gold reserves

BS Commodities Bureau

In contrast to the global scenario of some central banks selling gold from their reserves following the lacklustre price of the metal, the Reserve Bank of India has ruled out selling of gold from its reserves.

Speaking at the sidelines of a World Gold Council conference here, Y V Reddy, Deputy Governor of the RBI said, "At this moment, our reserve management as regards to gold can be termed as passive and conservative as the RBI does not trade in gold."

The RBI holds 357.75 tonne of gold, forming 6 per cent of the current value of its total foreign exchange reserves of about $50 billion.

He said that the forex reserves in India had gone up while that of gold had reduced. 'The question of selling gold comes when gold reserves are high," he added.

Central banks globally reduced their gold reserves to about 33,000 tonne till 2000 from 36,000 tonne till 1991, reflecting substantial sale by the banks and bringing down gold prices in the last decade.

"Central banks were lending their idle stocks with a view to enhance return on reserves bringing liquidity to the market to bridge the gap between supply and demand," Reddy said.

He said the signing of Washington Agreement by some central banks in 1999 has placed an effective cap on such operations.

However, George M Stanley, manager, gold market analysis of the World Gold Council said, "The auction of gold bars by the Bank of England was over. Moreover, the European Central Bank has put a 15 per cent minimum mark on gold reserve."

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