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Saturday, July 2, 2022

Indian Central Bank Accumulating Large Quantities Of Gold

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The Reserve Bank of India (RBI), almost under the radar, has now become one of the world’s biggest and most consistent central bank gold buyers every year for the last four years.

Starting in early 2018 and up to the end of August 2021, over that time the RBI has added a staggering 166 tonnes to it’s strategic gold reserves, and now holds a claimed 724.24 tonnes of gold, making India the 9th largest sovereign gold holder in the world, well ahead of the Netherlands (in 10th place), and within shouting distance of Japan (8th place).

According to it’s official figures, China (via the People’s Bank of China) last added to it’s monetary gold reserves in September 2019, leaving it with a unchanged official total of 1948 tonnes of gold since then.

This is notwithstanding the fact there is widespread skepticism about the real size of China’s sovereign gold reserves.

Additionally, the Russian Federation (via the Bank of Russia) officially stopped buying gold in the domestic Russian market at the end of March 2020 and actually made an official announcement about this hiatus at the time.

Due to this pause since March 2020, Russia’s official gold reserves have essentially remained unchanged except for some tiny adjustments, and Russia currently claims to hold 2,294.5 tonnes of monetary gold.

With these two gold buying giants now officially “off the grid”, the gold buying activities of the Indian central now come into sharper focus.

The Details    

According to the Reserve Bank of India’s latest FX Reserves report dated 16 September 2021, the RBI, as of 27 August, held 724.24 tonnes of gold.

See report online here and in pdf here.

Compared to the same report from 30 July 2021 when the RBI held a total of 711.18 tonnes, this shows that the RBI added 13.06 tonnes to it’s gold reserves during August 2021.

Prior to August, the RBI had already purchased a combined 34.6 tonnes of gold during five months of 2021 (in February, March, May, June and July).

Adding the 13.06 tonnes of gold that the RBI bought in August, this means that so far in 2021, the Indian central bank has bought 47.66 of gold, which on an annualized basis would be 71.5 tonnes, and would be more than the gold buying totals of Hungary (63 tonnes bought in March), and Brazil (62.3 tonnes bought during May, June and July).

This sizeable gold buying by the Indian central bank in 2021 is not a one off, and it continues a trend that began in early 2018. The following statistics come from World Gold Council (EGC) data (which itself is based on IMF data that each central bank submits to the IMF (on a voluntary basis)).

During 2018, the RBI accumulated a total of 42.3 tonnes of gold, with gold purchases claimed to be made in each of the 10 months from March to December 2018.

The following year in 2019, the RBI was again a substantial buyer of gold, adding a total of 34.5 tonnes during seven of the twelve months (each month from January to April, and again in each month between October and December).

During 2020, the RBI bought another 41.7 tonnes of gold, again by pursuing the ‘buy often and consistently’ strategy, adding gold to it’s reserves in each month except for January and September.

Therefore, over the three years of 2018 – 2020 inclusive, the Reserve Bank of India purchased 118.5 tonnes of gold. Adding the 47.66 tonnes of gold purchased so far in 2021 (up to the end of August), this means that since early 2018, the RBI has bought a whopping 166.16 tonnes of gold.

The 166 tonnes of gold purchased by the Indian central bank since 2018 is also nearly as much as the 200 tonnes of gold that India claimed to have bought from the International Monetary Fund (IMF) in October 2009, in what the IMF called an ‘off-market’ transaction.

There is little information known about how this sale by the IMF to India was transacted and, like everything in the central bank gold market, the real details remain secret.

From the RBI Annual report for 2021 (up to March 30, 2021), we see that of the RBI’s claimed gold holdings, “292.30 metric tonnes is held as backing for notes issued and shown separately as an asset of Issue Department”, while the rest “is treated as an asset of Banking Department”.

However, the gold held by the Banking Department and the gold held by the Issue Department are both classified as part of the RBI’s foreign exchange reserves, along with foreign currencies, and IMF SDRs.

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