Mumbai: The Reserve Bank of India (RBI) has made a significant move in its asset management strategy by purchasing 57.5 tonnes of gold during the financial year 2024-25. This acquisition reflects the central bank's ongoing commitment to bolstering its stock of safe haven assets, particularly as the prices of gold surged by over a third amidst a volatile global financial landscape.

This latest purchase marks the second-highest level of gold acquisition for the RBI since it began accumulating gold in December 2017. The geopolitical risks, fluctuations in the value of the US Dollar, and the uncertainties surrounding US government bonds have all contributed to the RBI's aggressive gold purchases, mirroring a broader trend among global central banks that are increasingly looking to diversify and secure their reserves.

As of the end of March 2025, the RBI's total gold reserves stood at 879.6 tonnes, a notable increase from 822.1 tonnes during the same period the previous year. The highest level of gold purchases by the RBI was recorded in the financial year 2021-22, when it added 66 tonnes to its reserves. This was followed by purchases of 35 tonnes in FY23 and 27 tonnes in FY24, illustrating a consistent strategy to enhance gold holdings.

Since the election of Donald Trump as President of the United States in November 2024, the US Dollar has seen considerable volatility, which has heightened the attractiveness of gold as a safe investment. Experts have noted that this trend is not isolated to India but is evident on a global scale, with central banks around the world aggressively increasing their gold reserves as a hedge against inflation and currency fluctuations.

Sajal Gupta, head of currencies and commodities at Nuvama, commented on this global shift, stating, All global central banks are reducing reliance on US Treasuries and shoring up gold reserves. This suggests a collective move towards securing wealth in gold amid concerns regarding the stability and returns associated with US government bonds.

According to the World Gold Council's Gold Demand Trends report for 2024, central banks are playing a crucial role in driving global gold demand. Their purchasing decisions are increasingly influenced by economic and geopolitical changes, indicating a broader strategic focus on gold.

It's worth noting that the proportion of gold in India's foreign exchange reserves has significantly increased, rising to 11.8% as of April 11, 2025, compared to 8.7% during the same time the previous year. The RBI has also benefited from the appreciation of its existing gold holdings, as gold prices surged by over 30% in the past year, enhancing the valuation of its reserves.

The Reserve Bank of India ranks among the top ten holders of gold in its foreign exchange reserves globally. Unlike many other central banks, such as those in Turkey, Switzerland, or China, the RBI rarely sells gold due to the political sensitivities involved in such a decision. The RBI's latest Half Yearly Report on Management of Foreign Exchange Reserves highlighted that while safety and liquidity are the primary objectives of reserve management in India, the optimization of returns is also considered within this strategy.

Gold purchases serve to shield the RBI from currency volatility and potential revaluation of reserves. However, recent trends indicate a possible moderation in the RBI's gold buying activities. After consistently acquiring an average of 6.6 tonnes per month from January to November 2024, the RBI paused its purchases in December and February, with January and March seeing acquisitions fall below the previous monthly average.

A recent report from the World Gold Council suggested that this pattern in gold purchases may indicate a more measured approach from the RBI, while still emphasizing gold's growing strategic importance in Indias reserves management policy.