Why is RBI hoarding so much gold from abroad, any indication?

Reserve Bank Gold Reserves: The Reserve Bank of India (RBI) has raised eyebrows by repatriating 100 tonnes of gold from the British central bank. Debates have gained momentum as to why the RBI is hoarding such huge amounts of gold from countries around the world. What hint did he get that caused him to take such a big step? According to a report in the English newspaper Economic Times, the gold held by the British Central Bank was given away several years ago. Apart from this, the year 2024 will start when it is actively buying gold from countries all over the world. In the first four months of the current year 2024, it bought about one and a half times as much gold metal as it did in the 12 months of 2023, and is now bringing back gold stored elsewhere. Let us find out what is the master plan of the RBI behind this huge hoarding of gold? How much gold does RBI hold abroad? The Economic Times report said that RBI has 822.10 MT of gold by the end of March 2024, of which 408.31 MT is held domestically. At the same time, 387.26 MT of gold is kept safe at the Bank of England and 26.53 MT of gold at the Bank for International Settlements (BIS). Why does RBI hold so much gold abroad? In 1990-91, under former Prime Minister Chandrasekhar, the state of the Indian economy was in decline, with only 15 days of foreign exchange reserves for imports, and then in 1991, the Reserve Bank converted part of its gold reserves. Bank balances were pledged off England. Then he sent 46.91 tons of gold to England and received a loan of 405 million dollars. The gold sent to Britain included a portion of the gold pledged in the Bank of Japan. Although India had repaid its loan from Britain by November 1991, the RBI preferred to keep the gold in the Bank of England’s vaults for logistical reasons. Has RBI already got any signal? After Russia’s attack on Ukraine on February 24, 2022, the war dragged on and geopolitical tensions began to rise around the world. China prepares to attack Taiwan after Russia’s attack on Ukraine. Israel is attacking Hamas. Iran is at odds with Saudi Arabia and other Gulf states over gas and petroleum products. The statement said that when there is geopolitical tension in the world, there will be uncertainty about the security of international assets in such a situation. Currently, the freezing of Russian assets by the West and the decline in the British economy have increased the Indian government’s concern about the security of its gold reserves abroad. What will RBI do with gold? After consultation with the government, the RBI may use gold reserves to control the price of gold in the domestic market, the report said. In particular, domestic demand for investment products such as gold exchange-traded funds can also be used to develop the local bullion market so that the country’s gold remains within domestic limits. Additionally, gold held in the form of certificates can be used to enter into trades and exchanges and earn income. That is why the Reserve Bank has also started depositing gold in the international market, which is logistically more convenient for keeping gold in the Bank of England vaults. Why is RBI buying so much gold? Gold can be used to fight inflation and currency instability and diversify foreign exchange reserves, the report said. The biggest reason why the RBI is building reserves by bringing in gold from abroad is because central banks around the world are losing confidence in the dollar. Data from the U.S. Treasury Department showed that non-U.S. central banks’ holdings of U.S. Treasuries fell from 49.8 percent in March 2023 to 47.1 percent by March 2024. Has Britain become like Pakistan? Tax and investment expert Balwant Jain says Britain’s repatriation of 100 tonnes of gold to India is good for the country’s development. Seriously, we need to get all our gold back. The reason for this is that the situation in Britain is becoming similar to that of Pakistan. Its economy is collapsing rapidly. So, it is not wise to keep your gold there. The post Why is RBI collecting so much gold from abroad, got a signal? Prabhat appeared first in Kabar.