Is gold really worth its actual weight in today’s age of demat assets?

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Subscribe to enjoy similar stories. Gold is heavy. Moving it is an onerous task.

Yet, the Reserve Bank of India (RBI) has been on a mission to haul its holdings across the high seas into vaults within the country. As an RBI report reveals, over 510 of the 854 tonnes held in reserve are now in India, with much of the rest lying with the Bank of England and Bank for International Settlements. At the end of 2021-22, only 39% of our 760-tonne stack was in domestic custody.

Today, it is 60%. Not only has our central bank been buying more, it seems keen on actual possession. As the global price of gold shot up over the past year, a rise that generated a buzz around it among retail buyers, enlarged tonnage seems to shine out as a worthy endeavour.

But should households follow suit by locking away more of this shiny stuff in their own lockers? Note that central banks and retail investors differ in their motives. In many countries, the former have a reason to diversify their forex reserves, of which gold remains a part—even if it’s seen as a relic from the days when bullion settled trade dues and backed currencies. After the Ukraine War led the US and its allies to freeze Russia’s dollar and euro assets in 2022, many central banks sought fortification against the risk of such clamps.

Notably, China has bulked up on gold, as have other countries. In fact, bulk purchases partly explain its price upshoot. After all, it’s a classic hedge not just against inflation but also any uncertainty that may haunt the global financial order: should instability strike, gold would not just survive, but gain as others pile into it as a store of value.