India's Foreign Exchange Reserves Stand at $634.59 Billion with a $824 Million Increase in Gold Holdings
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Mumbai, Jan 10 (NationPress): India's foreign exchange reserves have declined by $5.7 billion, bringing the total to $634.59 billion for the week ending January 3, according to the latest data released by the Reserve Bank of India (RBI) on Friday.
In contrast, the gold reserves, part of the overall foreign exchange reserves, saw an increase of $824 million, reaching $67.1 billion during the same week, as per the reported figures.
The RBI expanded its gold holdings by acquiring an additional 8 tonnes in November 2024, as central banks globally continued their purchasing trend with a collective acquisition of 53 tonnes of gold throughout the month, based on the recent report from the World Gold Council (WGC).
The RBI's strategy mirrors that of many other central banks, focusing on gold as a safe-haven asset. This approach aims to safeguard against inflation and mitigate risks associated with foreign currencies, particularly during periods of uncertainty linked to geopolitical tensions.
With the latest addition of 8 tonnes in November, the RBI’s total gold purchases have reached 73 tonnes in the initial eleven months of 2024, raising its overall gold reserves to 876 tonnes, thus maintaining its status as the second largest buyer of gold in that timeframe, trailing only Poland.
According to Pranav Mer, Vice President at JM Financial Services Ltd., “Gold has risen by 1.3 percent and silver has increased by over 3 percent this week, despite a stronger U.S. dollar in international markets. The bullion market is buoyed by safe-haven demand ahead of January 20, when Donald Trump will take office, and interest will shift to his policy announcements, while additional support is seen from renewed buying by ETF investors.”
The RBI employs its forex reserves to manage rupee volatility, which can occur when foreign investors withdraw from the stock market.
Meanwhile, Deputy Governor Rabi Sankar stated at a press conference on Thursday that the RBI is well-prepared to address potential extreme fluctuations in the exchange rate that may arise from the Trump administration. He also dismissed the idea of granting oversight rights of the Indian bond-clearing platform to European authorities, likening it to a breach of sovereignty.
In situations where the rupee experiences a significant drop, the RBI intervenes by releasing dollars into the market to prevent a steep decline. This action contributes to maintaining the currency's stability. Strong foreign exchange reserves facilitate these operations and reinforce the rupee's position.
