RBI banks on gold, pares US assets amid global uncertainty: Report

Economists view this trend as part of a broader strategy to diversify India's forex holdings amid concerns over the US economy and global trade frictions.

The Reserve Bank of India (RBI) appears to be showing a growing preference for gold over dollar-based assets, according to data reported by The Economic Times citing figures from the RBI and the US Department of Treasury. Since the start of the current fiscal year, the central bank has been steadily boosting its gold reserves while gradually cutting back on its holdings of US Treasury securities.

As per ET, the RBI's gold stockpile has now exceeded 880 tonnes after the addition of 600 kilograms so far this fiscal. In contrast, India's investment in US Treasury securities has fallen to a seven-month low of $219 billion. The country's overall foreign exchange reserves stood at $698 billion for the week ending October 10.

Data accessed by ET shows that the RBI purchased 200 kilograms of gold in the week ending September 26 and another 400 kilograms in the week ending June 27. Meanwhile, its exposure to US Treasuries dropped in July - the most recent month for which official US data is available.

Economists view this trend as part of a broader strategy to diversify India's forex holdings amid concerns over the US economy and global trade frictions. "There appears to be a policy of diversifying forex reserves. Gold is a good choice given also an upside in value, although that may not be a consideration for the central bank," ET quoted Madan Sabnavis, Chief Economist at Bank of Baroda, as saying. "From a market perspective, there is uncertainty in the state of the US economy and implications of tariffs. Interest rate policy also is uncertain given inflation potential. This supports the action of buying gold."

According to ET, the RBI's holdings of US Treasury securities stood at $219.7 billion, down from $227.4 billion a month earlier and $238.8 billion a year ago.

A Golden Glow

The Economic Times reported that the rise in global gold prices has also enhanced the value of India's gold reserves, which crossed the $100 billion mark for the first time, reaching $102.36 billion as of October 10. Gold now accounts for 13.6% of the RBI's total forex reserves, up from 9.3% a year earlier, when India's overall reserves had touched an all-time high.

Globally, ET noted, central banks continue to accumulate gold despite elevated prices, seeing the metal as a reliable store of value in uncertain times. The World Gold Council, using data from the IMF and various central banks, estimated that central banks collectively added 15 tonnes of gold to their reserves in August.

Central bank holdings of US Treasury securities, ET added, currently total $9.1 trillion, with Japan leading at $1.1 trillion, followed by the UK ($899 billion) and China ($730.7 billion).