Gold Purchase: RBI raises its gold purchase to 65 tonnes in FY22

The Reserve Bank of India nearly doubled its gold purchase to 65 tonnes in FY22 raising its total holding to 760.42 tonnes, as part of its asset diversification policy with gold showing better performance as a safe asset class during the recent global financial turmoil.

In the nine month period between June 2020 and March 2021, RBI had bought 33.9 tonnes of gold.

The value of RBI’s gold holdings rose as much as 30% to Rs 3.22 lakh crore. Of this, gold valued at Rs 1.25 lakh crore is held as an asset of RBI’s issue department and gold (including gold deposit) valued at Rs 1.97 lakh crore is held as an asset of the banking department.

This higher valuation was on account of additional purchases and also due to increase in the price of gold and depreciation of rupee against dollar, RBI said in its annual report.

“The observations across the various phases of the different financial cycles imply that in addition to providing a greater risk hedge to the US dollar, gold’s performance as a safe asset among other asset classes has also improved in the recent phases of financial cycles,” RBI said.

RBI’s domestic assets constituted 28.22% while the foreign currency assets and gold (including gold deposit and gold held in India) constituted 71.78% at the end of March as against 26.42% and 73.58% respectively a year ago.

At the end of March, RBI held 760.42 metric tonnes of gold (including gold deposits of 11.08 metric tonnes). Out of this, 453.52 metric tonnes of gold is held overseas with the Bank of England and the Bank of International Settlements (BIS), while 295.82 metric tonnes of gold is held locally.

The share of gold in the total foreign exchange reserves increased to 7% at the end of March from about 5.88% six months prior to that.