Why did RBI buy so much gold at high prices in 4 months?

Everyone likes to buy gold, because it is such a precious metal which is very useful in times of trouble. Whenever geo-political tension increases in the world and the stock market falls, investors rush towards gold. Not only people but also the government starts buying gold. To guard against instability amid geopolitical tensions, the Reserve Bank of India has added 24 tonnes of gold to its gold reserves in the 4 months from January to April this year.

Surprisingly, analysis of Reserve Bank data shows that this amount of gold is almost one and a half times the amount of gold purchased during the entire year in 2023. Last year, RBI had added 16 tonnes of gold to its gold reserves.

How much gold is there in RBI’s gold reserve?

According to the latest RBI data, gold as part of RBI’s foreign exchange reserves as of April 26, 2024 was 827.69 tonnes, which was 803.6 tonnes at the end of December. Actually, India is the largest consumer of gold after China. Every year, people buy gold in large quantities in the country, but this is the first time that RBI has been so active in increasing its gold reserves.

Why is the Reserve Bank buying gold?

Actually, the Reserve Bank of India is buying gold with the aim of diversifying its financial resources. Business all over the world is done in US dollars. In such a situation, if the dollar weakens, the value of the dollar held by the RBI also reduces. But gold prices move independently of the dollar, hence investment in gold is a ‘safe investment’ for RBI.