RBI buys 61 tonne gold since January 2020

The Reserve Bank of India bought 61 tonnes of gold since January 2020 in staggered purchases. The World Gold Council says central banks will continue to be positive on gold in 2021 as well, though their purchases might be lower than in 2020.

During the pandemic year of 2020, the RBI purchased 41 tonnes of gold. Its gold reserves stood at 635 tonnes at the end of 2019 and expanded to 676.6 tonnes at the end of the year. The central bank continued its staggered purchases in 2021 as well by accumulating 20 tonnes till May. At the end of May 2021, the gold reserves stood at 696.2 tonnes.

The World Gold Council’s central bank gold reserves survey found that central banks will continue to be positive on gold, with roughly the same number of central banks expected to buy gold compared to last year. Around 21 per cent of central banks intend to increase their gold reserves over the next 12 months. Central banks are also increasingly valuing gold’s performance during periods of crisis.

Though the Bank of Russia had announced to halt its regular purchases, 52 per cent of respondents believe that global central bank gold holdings will grow in the coming year. However, 75 per cent of respondents believed so last year. At the same time, only 11 per cent do not know their plans for gold this year compared to 20 per cent last year.

Further 32 per cent of respondents say that global central bank gold holdings will remain unchanged while 5 per cent say that they will decrease. These results may reflect the slowdown in central bank gold buying in 2020 when net purchases declined to 326 tonnes compared to 668 tonnes in 2019.

Post-Covid economic recovery, negative interest rates, continuation of expansive monetary and fiscal policies combined with the prospect of rising inflation will likely be at the forefront of central bankers’ concerns for the foreseeable future.