MUMBAI, JULY 10: The depreciating value of yellow metal is creating a big dent on India's foreign exchange reserves. The steep fall in the value of gold in domestic and international markets has pulled down the foreign exchange reserves of the country by $ 154 million (around Rs 667 crore) during the period ended July 2, 1999.Bullion experts feel the forex reserves might have fallen further in the last week as gold prices had taken further beating following the sale of the yellow metal by Bank of England of the UK. India's forex reserves comprise foreign currency assets, gold reserves and special drawing rights (SDRs) from the IMF. The Reserve Bank of India holds sizeable gold reserves (part of which was pledged in 1990-91 when India faced a major forex crisis).The total foreign exchange reserves fell by $ 167 (including $ 154 million on account of gold crash and $ 13 million drop in foreign currency assets) million during the week ended July 2 led by a steep fall in the value of its gold holdings,reflecting weak world prices. Forex reserves were $ 33.009 billion on July 2, down from $ 33.176 billion in the previous week. Analysts said the drop in gold holdings was on account of losses following the drop in international gold prices. The central bank (RBI) does not indicate reasons for the drop in reserves. ``It is purely valuation. They (RBI) carry out periodic valuation of their portfolio and the drop in gold holdings may be to account for falling global gold prices,'' a senior banker said.The Indian bullion market was hit after the price of gold slumped to the lowest point in 20 years today after Britain had launched controversial bullion sales with an auction that drew plenty of bidders looking for a bargain, but criticised by major producers worldwide. Standard gold in Mumbai fell to Rs 4070 per 10 gram, showing a big fall of Rs 70 on July 7.In London, the price fell below $ 258 an ounce for the first time since May 1979 after Britain had sold 25 tonnes of the metal in the first auction of afour-year programme to convert more than half of its gold reserves into foreign currencies. Investors have been nervously awaiting the results of auction ever since Britain stunned the market in May by announcing its radical plans to sell 415 tonnes of its 715-tonne gold stock and channel the proceeds into yen, dollars and euros.On the other hand, traders said the relatively small drop in the foreign currency assets indicated lower intervention by the central bank to prop up the rupee against the dollar in the recent days. The rupee was traded in a weaker range during the week and ended at 43.39/40 per dollar on July 2. The central bank's reserves have fallen after the rupee came under pressure since the start of the Kashmir conflict on May 26, when India first carried out airstrikes to evict what it calls Pakistani troops and militants holed up in its territory. The RBI's foreign exchange reserves touched a record high of $33.532 billion on May 28, helped by a rush of foreign fund flows to buy Indianequities.While the reserves have been dipping on account of the recent pressure on rupee and gold crash, there was massive inflow of FII funds in the last three months. On top of this, foreign direct investment also shot up in the last one year, thereby boosting the reserves. Top
