RBI joins central bank gold rush, buys 9 tonnes in Jul-Sep

livemint.com:

MUMBAI : The Reserve Bank of India (RBI) purchased nine tonnes of gold in the September quarter, contributing to the 337 tonnes purchased by global central banks, and underscoring the importance of gold as a diversifier of its total reserves. With the latest quarterly buying, India’s official gold reserves stood at 806.7 tonnes as of September end, placing it at No. 10 in the pecking order, according to miner’s lobby World Gold Council (WGC).

Purchases so far this year have totalled 19.3 tonnes. RBI has been adding gold to its total reserves since 2017. From then until the current year it has purchased 248.9 tonnes, WGC data shows.

India’s total forex reserves stood at $586.9 billion as of 29 September, out of which the value of gold held was $43.7 billion or 7.44% of the total reserves, according to RBI’s Weekly Statistical Supplement on 6 October. RBI data as of 10 November shows the total reserves at $590 billion and value of gold held at $45.5 billion or 7.7% of the total. Eighty eight per cent of the reserves were held in the form of foreign currency.

“Though RBI doesn’t explicitly reveal how much gold it buys, the latest purchases reflect more of a balancing act amid volatility in US treasuries and in the foreign exchange market," said Sujan Hajra, group chief economist at AnandRathi. Madan Sabnavis, chief economist at Bank of Baroda, said gold acts as a diversifier when US T-bill yields or the dollar begin to fall as the Reserve Bank of India has an internal policy as to how much of currencies to hold and how much of gold as a percentage of overall reserves. “Fed chair Jerome Powell indicated that the bank could hold the Fed Funds Rate (FFR) at 5.25-5.50% with inflation beginning to soften, after which the dollar