The Reserve Bank of India (RBI) increased its gold reserves in 2024 by 72.6 tonnes. Notably the central bank ranked just behind the Polish and the Turkish central banks in net buying of gold bullion in 2024.
The massive gold purchase in 2024 came at a time when markets across the globe witnessed high levels of uncertainty in the wake of the tension in the Middle East and run-up to the US Presidential election.
The RBI’s total stock as of December 2024-end stood at 876.18 tonnes, valued at $66.2 billion, up by 9 per cent from 803.58 tonnes in 2023, valued at $48.3 billion, according to a report in ET.
The 72.6 tonne purchase in 2024 is the highest by volume since 2021 and the second highest in any calendar year since 2017. Notably RBI is among the top-10 holders of gold in the world. The RBI does not sell any of the gold it owns which is unlike other major central banks.
Amid global macroeconomic uncertainties, the price of gold increased over 25 per cent in 2024 increasing the valuation of the total gold reserves held by the bank.
Why Do Central Banks Purchase Gold?
Gold reserves help central banks in diversifying their reserves. While all central banks own their currency, the value of the currency is fluid and depends on larger macroeconomic factors. Gold provides a hedge against any decline in the value of the currency due to fluctuation. Moreover it is not easy to add to the supply of gold as it is a finite commodity, which makes it a safer asset to counter inflation. Gold also has an inverse relationship with the dollar; any dip in the value of the dollar typically causes a rise in the value of gold.
