RBI buys 32.63 tonnes of gold in first half of FY25

In value terms (USD), the share of gold in the total foreign exchange reserves increased from 8.15 per cent as at end-March 2024 to about 9.32 per cent as at end-September 2024. Gold is generally seen as a hedge against inflation and its prices have shown an uptrend over the years.

According to the RBI, the value of its gold holdings has shot up to $ 65.74 billion as of September 2024 as against $ 52.67 billion in March 2024.

The RBI held 822.10 tonnes of gold as of March 2024 and 800.79 tonnes of gold in September 2023, as per RBI data. This indicates that the central bank has been increasing its gold reserves almost every month.

Central banks generally accumulate gold as part of the de-dollarisation process, leading to a jump in the price of the yellow metal. The strategy is to diversify their portfolios.

Gold prices (999 variety) were at Rs 78,745 per 10 grams in Mumbai on Tuesday.

The major factors behind the recent rally in gold prices are uncertainty around slower growth in major economies and rising conflict in the Middle East. This has led to investors buying gold, which provides a hedge against any volatility. Over the next one-year timeframe, analysts expect the gold price to touch a high of Rs 85,000 per 10 grams, or $3,000 per ounce over the next one year.

Investment in gold provides safety against inflation and any economic uncertainty. It can help investors in wealth creation. Since gold price is expected to further rise, market experts suggest investors to consider investing in the yellow metal as part of the diversification strategy. Investors can invest in gold in different forms – physical (bars, coins and jewellery), stocks of companies dealing in gold jewellery, gold exchange-traded funds (ETF) and in gold futures.

The foreign currency assets comprise multi-currency assets that are held in multi-asset portfolios as per the existing norms, which conform to the best international practices followed in this regard, the RBI report said.

As at end-September 2024, out of the total foreign currency assets of $ 617.07 billion, $ 515.30 billion was invested in securities, $ 60.11 billion was deposited with other central banks and the BIS and the balance $ 41.66 billion comprised deposits with commercial banks overseas. With the objective of exploring new strategies and products in reserve management while diversifying the portfolio, a small portion of the reserves is being managed by external asset managers. The investments made by the external asset managers are governed by the permissible activities as per the RBI Act, 1934, the RBI said.

At the end of June 2024, foreign exchange reserves cover of imports (on balance of payments basis) stood at 11.2 months (11.3 months at end-March 2024), the report said.

The ratio of short-term debt (original maturity) to reserves, which was 19.7 per cent at end-March 2024, increased to 20.3 per cent at end-June 2024. The ratio of volatile capital flows (including cumulative portfolio inflows and outstanding short-term debt) to reserves increased marginally from 69.8 per cent at end-March 2024 to 70.1 per cent at end-June 2024.