RBI aggressively buying gold..!? Why?

The price of gold rose by about 30 percent last year. If we expect a slight decrease this year, the price of gold continues to rise. This means that the price of gold has risen by more than 10 percent so far this year. The price of gold rose by more than 1.5 percent last monday due to Trump's announcement. Last Sunday, US President trump said that he plans to impose an additional 25 percent tax on all steel and aluminum imports. trump also said that he will announce reciprocal taxes this week to match the tax rates imposed by other countries. Trump's move has raised the risk of a trade war between countries.
Due to this, investors have started investing in gold, which is a safe investment. Central banks around the world are also buying and accumulating gold. According to the World gold Council, for the third consecutive year, central banks' gold purchases exceeded 1,000 tonnes last year. In 2024, central banks bought 1,044.6 tonnes of gold. poland bought the most at 89.54 tonnes of gold. Next, the bank OF INDIA' target='_blank' title='reserve bank of india-Latest Updates, Photos, Videos are a click away, CLICK NOW'>reserve bank of india bought 72.60 tonnes and china 44.17 tonnes. As of the end of 2023, the bank OF INDIA' target='_blank' title='reserve bank of india-Latest Updates, Photos, Videos are a click away, CLICK NOW'>reserve bank of india had 803.58 tonnes of gold worth $48.3 billion in its reserves. In 2024, the value and volume of gold in the reserves increased to $66.2 billion and 876.18 tonnes, respectively. Last year alone, the Reserve bank bought 72.60 tonnes of gold. This is the highest amount that the Reserve bank has purchased in a single year since 2021.
 
 The Reserve bank had purchased only 18 tonnes of gold in 2023. Moreover, this is the second-highest gold purchase by the Reserve bank since 2017 (in 2024). Many people wonder why the Reserve bank is buying gold so aggressively since it does not buy or trade gold. But there is an important reason why the Reserve bank is buying and hoarding gold. The Reserve bank is actively buying gold as gold purchases help it protect itself from currency fluctuations and the resulting revaluation (depreciation) of reserves. For example, during the April-September 2024 period, foreign exchange reserves increased by an additional $56 billion due to valuation gains. During the same period, gold prices rose by over 25 percent. Although the Reserve bank did not earn any trading profit on its gold reserves, the appreciation in the value of gold in its reserves helped to increase the value of total foreign exchange reserves. For example, as of january 31, 2025, the foreign exchange reserves held by the bank OF INDIA' target='_blank' title='reserve bank of india-Latest Updates, Photos, Videos are a click away, CLICK NOW'>reserve bank of india stood at $630.6 billion. This was $1.05 billion more than the week ended january 24. The main reason for this was gold reserves. The value of gold alone rose by $1.2 billion to $70.89 billion during that week. Even as the value of currencies held by the bank OF INDIA' target='_blank' title='reserve bank of india-Latest Updates, Photos, Videos are a click away, CLICK NOW'>reserve bank of india has depreciated, the value of gold in its reserves has risen, increasing the overall value of foreign exchange reserves.
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Sowmiya Sriram

11/02/2025 07:39 PM