RBI’s gold holdings now exceed India’s annual demand for the precious metals

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The Reserve Bank of India (RBI) holds 828.6 tonnes of gold currently, which is more than the country’s average annual demand of 750-800 tonnes, notwithstanding the high prices for the precious metal. RBI has joined other central banks in gold plating now.

The overall demand for gold in the country last year was down marginally at 747 tonne against 774 tonne in 2022.

RBI added 25 tonnes of gold since the start of the year taking the overall holding to a new peak as of April-end.

The central bank’s net gold acquisitions in this year has exceeded last year’s purchase of 16.2 tonnes. The RBI, on average, has been purchasing about 6 tonnes of gold a month this year. As of early May, gold comprised 8.5 per cent of its total reserves, up from 7.7 per cent at the close of 2023.

Kavita Chacko, Research Head-India, World Gold Council, said RBI is among major emerging market central banks that have been driving gold purchases in this year and seems to be on track for net gold acquisition reminiscent of levels of 77.5 tonne recorded in 2021 when the average monthly buying was 6.5 tonne.

In March, the Centre exempted 15 per cent import duty and 5 per cent Agriculture Infrastructure Development Cess on gold imported by the RBI.

Gold imports

Consumers interest in the yellow metal has been growing leading to revival in imports despite volatile pricing. Gold imports in April hovered around 50 tonne, higher than 34 tonne in March and 17 tonne logged in April, 2023, according to WGC estimate.

The trend is despite record high prices during the month and can be attributed to the stocking up in readiness for Akshaya Tritiya in May, said WGC.

Gold prices which were hovering around Rs 72,700 per 10 gram in April fell to touch Rs 71,500 on May 9, but zoomed to Rs 73,008 on May 10, according to Indian Bullion and Jewellers Association data.

Gold imports into the country was up 20 per cent last year to 781 tonne against 651 tonne in 2022 even as overall demand was down three per cent at 747 tonne against 774 tonne logged in the previous year.

Rising consumer interest was reflected in the reduced discounts on domestic gold prices in relation to international prices. India’s gold price discounts averaged $3 an ounce in the first fortnight of May, down from $10 an ounce in April.