• The Reserve Bank of India (RBI) purchased an additional eight tonnes of gold in November 2024, increasing its total gold holdings to 876 tonnes.
• This move aligns with global trends of central banks buying gold as a safe-haven asset, especially during times of geopolitical uncertainty.
• The People's Bank of China also resumed gold purchases, while the Monetary Authority of Singapore reduced its gold reserves.
• The RBI shifted 100 metric tonnes of its gold from UK vaults to India, a strategic move aimed at hedging against inflation, reducing foreign currency risks, and saving on storage costs.

The Reserve Bank of India (RBI) has made a significant move by purchasing an additional eight tonnes of gold in November 2024. This decision aligns with the trend of central banks worldwide, which, according to the latest World Gold Council (WGC) report, collectively bought 53 tonnes of the precious metal during the month. The RBI's decision to buy more gold comes amidst a decline in gold prices following the US election, which may have spurred some central banks to accumulate the precious metal.

The RBI, like other central banks, has been buying gold as a safe-haven asset. The strategy of holding gold is primarily aimed at hedging against inflation and reducing foreign currency risks, especially in times of uncertainty triggered by geopolitical tensions.

With the addition of eight tonnes of gold to its reserves in November, the RBI has increased its buying to 73 tonnes in the first 11 months of 2024 and its total gold holdings to 876 tonnes. This makes it the second-largest buyer during the year after Poland.

RBI's Gold Purchases and Global Trends

Meanwhile, the People's Bank of China (PBoC) has resumed gold purchases after a six-month gap, adding five tonnes of gold to its reserves. This has increased its year-to-date net purchases to 34 tonnes and its total reported gold holdings to 2,264 tonnes, which is 5 per cent of total reserves.

On the other hand, the Monetary Authority of Singapore was the month's largest seller, reducing its gold reserves by 5 tonnes. This brings the year-to-date net sales to 7 tonnes and overall gold holdings to 223 tonnes.

The RBI's gold purchases have shot up by five-fold over the quantity of the precious metal bought in the same period of 2023, according to WGC figures. The RBI's total gold reserves have now gone up to 890 tonnes, of which 510 tonnes are held in India. Other central banks that bought gold during the month include Poland, which added 21 tonnes, and Uzbekistan, which bought nine tonnes.

Impact on Gold Prices and RBI's Strategic Move

These large purchases of gold by central banks have also been driving up prices of the precious metal in the global market. More than half of the RBI's gold reserves are held overseas in secure custody with the Bank of England and the Bank of International Settlements, while approximately a third is stored in the RBI's vaults in Nagpur and Mumbai.

In a significant development, the Reserve Bank shifted 100 metric tonnes of its gold kept in bank vaults in the United Kingdom to its own vaults in India in 2024. This was possible due to the sufficient domestic storage capacity in the country. The shifting of the gold reserves is expected to result in a saving in the high fees that were paid for the use of vaults in the UK.

This move is reminiscent of a similar event in 1991 when the Indian government, led by Prime Minister Chandra Shekhar, was facing a severe balance of payments crisis. The government had to pledge gold to raise funds. The recent shifting of gold back to India has a special meaning for those who remember the 1991 crisis as a moment of failure.