The value of gold in forex reserves has jumped 53 per cent to ₹6.65 lakh crore as of March-end from ₹4.35 lakh crore logged in the same period last year

The Reserve Bank of India (RBI) move to accumulate gold consistently as part of forex reserves management has paid off rich dividend with the yellow metal prices hitting a new high every passing day.

Given the global uncertainty, gold holdings has been one of the key factors boosting forex reserves even as the rupee faces the impact of the US trade tariff war.

The value of gold in forex reserves has jumped 53 per cent to ₹6.65 lakh crore as of March-end from ₹4.35 lakh crore logged in the same period last year.

In the same period, overall forex reserves of RBI has moved up 6 per cent to ₹56.87 lakh crore against ₹53.84 lakh crore. The share of gold in total forex reserves rose to the highest level of 12 per cent and almost 4 percentage points higher than last year, according to RBI data.

Amid global uncertainty triggered by Russia-Ukraine and Middle-East war, RBI has bought 73 tonne of gold last year and added 3 tonnes in January bringing its total holdings to 879 tonnes.

The RBI held off buying gold in February. However, the central bank has been increasing its gold holdings consistently since the beginning of 2024, purchasing an average of 6.3 tonne in 12 of the last 14 months.

Aamir Makda, Commodity & Currency Analyst, Choice Broking said traditionally dominated by the US dollar, the forex reserves are being rebalanced with increased gold holdings to lessen dependence on a single currency and mitigate risks from currency fluctuations.

While a surge in gold prices may temporarily slow aggressive central bank gold buying, the fundamental goals of diversification and risk management suggest a long-term commitment, said Makda.

Gold price rally

Gold prices have hit 15 new highs so far in 2025 and have crossed the psychological threshold of $3,000 an ounce and closed at $3,106 an ounce on Friday.

Geopolitical and economic uncertainty, a weaker dollar, lowering of interest rates across economies and inflation concerns are fuelling investment demand and influencing prices.

Palka Arora Chopra, Director, Master Capital Services said the RBI’s current pattern of buying gold comes out as a strategic move for risk management in volatile times and is in line with major global economies which are recalibrating their reserves by boosting gold holdings, signalling a collective recognition of its importance as a safe haven.

With the dollar facing volatility due to extreme policy shifts and a potential slowdown in the US, she said gold makes the ultimate alternative for India’s reserves.

Ajay Garg, CEO, SMC Global Securities said with the US reciprocal tariffs, the demand for Indian products in the US may decrease, which can directly affect India’s export earnings and reduce the forex reserves.

In these unprecedented and volatile times, where most asset classes have taken a hit and economic data is expected to weaken, the RBI is likely to continue increasing its gold reserves.

Published on April 4, 2025