RBI Gold Reserve On the Rise. Hinting at Recession Ahead?

RBI Gold Reserve On the Rise. Hinting at Recession Ahead?

It’s been a gruelling year for every market as the unpredictable and impending fall of the US might as well be upon us as inflation soars at great heights. In a reaction to this the RBI gold reserve has shown a significant development

With war raging on and spreading like wildfire along with other factors in play in the geopolitical landscape, the fate of gold seems to be hanging in the balance. 

But as we all know gold is a safe haven commodity, it’s preferred by all and India’s central bank, The Reserve Bank of India is well aware of the situation that’s been arising in the world. So let’s get into it. 

Bolstering of the RBI Gold Reserve – A Wake Up Call For Commodity Traders? 

The Reserve Bank of India has acted smartly as they have reinforced their commitment to diversifying into gold by acquiring 9 tonnes in the September 2023 quarter thereby contributing to the 337 tonnes that have been amassed globally by the central bank gold reserves. 

Currently, India has grasped almost 806.7 tonnes of gold in RBI gold reserves and has secured the 10th position in global reserves according to a report published by the World Gold Council. 

As of 2023 RBI’s gold purchase has amounted to 19.3 tonnes and the central bank has consistently been adding to the RBI gold reserves since 2017. Additionally, India’s total forex reserves have reached $586.9 billion with gold accounting for $43.7 billion or 7.44%. 

Why has the RBI taken this step now? 

With wars raging on and a potential recession incoming in the global economy, it was a wise decision. 

Recently, China has been dumping US assets in order to amass gold themselves. The data from the US treasury a few weeks back states that Chinese investors sold $21.2 billion worth of US assets in August and some have stated that the Fed’s continued rate hikes have been a contributing factor to this. 

On the ground level as well, a report from Kahn Estate jewellers in the US has seen a revised sentiment in consumers wherein they are selling gold not to invest or buy something, but to pay mortgages and survive in this economy. 

The strategic move by the RBI has come after these reasons and also due to volatility in US treasuries and foreign markets. Gold also has served as a diversified amid the volatility of the dollar. 

The RBI’s approach is seen to be aligning with its internal policy thereby balancing currency holding with the gold as a percentage of overall reserves. 

Future outlook from Commodity Samachar:

With the change in RBI’s gold trends, it’s a sign that markets are preparing for the coming of a new era. Head of Research at Commodity Samachar, Ankit Kapoor had a few interesting things to add to this. 

” It is clear now that the economy is going through something different with the US economy facing turmoil and also the wars that have changed the geopolitical landscape. 

The RBI is supposed to maintain a balanced amount of gold reserves as it is a good hedge against any unforeseen geopolitical events. Currently with upcoming FOMC meetings and also due to the suggestions by members that there might be another hike incoming, the situation may lead to a slight recession. Hence, the gold commodity has become a safe haven asset preferred by many traders as an important asset in tackling these issues. 

If the interest rates remain steady for the next year, then we can get to see a push in gold. By the end of next year, an increase from the current 806.7 tonnes to above 1000 tonnes can be seen being initiated by the RBI.” 

Commodity Samachar
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