Strengthening Domestic Reserves

The RBI’s latest data reveals a decisive trend of bringing physical gold back to Indian shores. By shifting reserves from international hubs like London and New York, India is ensuring its assets remain under its direct control.

• Domestic Surge: India’s gold held within the country has jumped from 575.8 tonnes to 680 tonnes.
• Reduced Overseas Exposure: Gold stored with the Bank of England and the Bank for International Settlements (BIS) has dropped from 290.4 tonnes to 197.7 tonnes.

Currently, over 65% of India’s total gold reserves are now securely stored within the nation’s own vaults, a stark contrast to previous decades when the majority was held abroad.

Gold as a Shield for the Economy

While the physical quantity of gold saw a marginal increase, the monetary value of these reserves has witnessed an extraordinary surge due to soaring global gold prices.

Compared to September 2025, India’s gold reserves saw a marginal increase by March 2026. The total quantity rose from 880.2 tonnes to 880.5 tonnes, marking a gain of 0.3 tonnes. Meanwhile, the total value jumped significantly from 97.4 billion dollar to 115.4 billion dollar, an increase of 18 billion dollar. Additionally, gold’s share in forex reserves increased from 13.9% to 16.7%, reflecting a rise of 2.8%.

This increase highlights gold’s role as a critical hedge, now accounting for nearly 17% of India’s total Foreign Exchange Reserves, providing a robust cushion against currency volatility.

Security, Sovereignty, and Sanction-Proofing

The decision to bring gold home is not just about logistics; it is a calculated geopolitical strategy. Following the footsteps of other major central banks, the RBI is prioritizing “Self-Reliance” (Atmanirbharta) over reliance on global financial hubs.

Why is the RBI bringing gold back?

• Geopolitical Tensions: Ongoing conflicts and shifting alliances have made central banks wary of keeping assets in foreign jurisdictions.
• Protection Against Sanctions: The freezing of foreign reserves seen in recent global conflicts has served as a wake-up call. By holding gold domestically, India ensures its assets cannot be blocked or seized by Western sanctions.
• Crisis Management: In the event of a global financial meltdown, having physical gold within the country allows the government immediate and total control over its most liquid asset.

Since 2023, the RBI has repatriated approximately 280 tonnes of gold, signaling that the era of keeping India’s “Family Jewels” in London is rapidly coming to an end.

FAQ’s

1. Why is the RBI bringing gold back to India?
The RBI is repatriating gold to strengthen financial sovereignty, reduce dependence on foreign vaults, and protect assets from geopolitical risks and potential sanctions.

2. How much gold has RBI recently repatriated?
Between September 2025 and March 2026, the RBI brought back 104.2 metric tonnes of gold to India.

3. How has India’s gold reserve distribution changed?
Gold held domestically increased from 575.8 tonnes to 680 tonnes, while overseas holdings declined significantly, with over 65% now stored within India.

4. What impact has this had on the value of gold reserves?
Although the quantity saw a small increase, the total value jumped by $18 billion due to rising global gold prices, strengthening India’s forex reserves.

5. How does this move benefit India’s economy?
Holding gold domestically improves crisis management, ensures liquidity during emergencies, and acts as a hedge against currency volatility, enhancing overall economic stability.

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According to Marissa Salim, Senior Research Lead for APAC at the World Gold Council, central bank gold demand remained robust, with year-to-date (y-t-d) buying reaching 694 tonnes by Q3 2024. October alone doubled the 12-month average, with RBI leading the charge, adding 27 tonnes during the month and bringing its total y-t-d purchases to 77 tonnes—a fivefold increase compared to 2023.

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October’s Record-Breaking Gold Buying
Globally, central banks reported 60 tonnes of net purchases in October, marking the highest monthly total for 2024. The RBI led with 27 tonnes added to its reserves, followed by Turkey (17 tonnes) and Poland (8 tonnes). Other notable buyers included Kazakhstan, which added 4 tonnes after months of net selling, and Kyrgyzstan, with 2 tonnes added.

Emerging Markets Dominate Gold Buying
Emerging markets continue to dominate the gold-buying landscape. Turkey added 72 tonnes y-t-d, accounting for 34% of its total reserves, while Poland followed closely with 69 tonnes y-t-d, making up 17% of its reserves. The National Bank of Kazakhstan, after five months of selling, recorded a net y-t-d reduction of 4 tonnes despite its recent additions. Ghana’s reserves also rose steadily, reaching 28 tonnes, with a further 1 tonne added in October.

Strategic Importance of Gold for Central Banks
Marissa Salim highlighted the enduring strategic value of gold for central banks:
“Central bank demand remains robust, with y-t-d buying comparable to levels seen in 2022. Despite rising gold prices inhibiting some purchases, October’s rebound signals continued interest in gold as a strategic asset to manage risks and diversify reserves.”

The robust demand reflects central banks’ focus on reducing reliance on traditional currencies and ensuring resilience in their reserve portfolios, with India leading this global trend in 2024.

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Kavita Chacko, Research Head, India, World Gold Council, says, “We anticipate that jewellery demand will predominantly centre around the festival season starting in the latter half of Q3. Interest in bars and coins is expected to continue.”

Gold prices hit a new all-time high in mid-May before pulling back due to profit-taking, ending the month at $2,343 per ounce—a 1% monthly rise. This added to gains of 9% in March and 5% in April. Prices further dipped to $2,317 per ounce in early June following a robust U.S. jobs report and a pause in gold purchases by the People’s Bank of China (PBoC). Despite these fluctuations, gold remains one of the best-performing assets this year, with a 12% return. Indian gold prices have mirrored international trends, supported by the stable USD/INR exchange rate.

The Akshaya Tritiya festival on May 10, traditionally a significant day for gold purchases, saw a brief surge in demand. However, gold buying, especially for jewellery, declined afterward, mirroring the tepid demand in March and April due to high prices. The record-high prices in mid-May further suppressed demand during the typical low season from mid-May to July. Nonetheless, there were reports of continued interest in bars and coins, fueled by positive investor sentiment towards gold as a valuable investment.

Kavita Chacko adds, “The current trend of subdued jewellery demand is expected to continue over the next few months with a potential uptick anticipated during the onset of the festival season in the latter half of Q3. Conversations with the industry suggest that manufacturers are choosing not to increase their inventories at this time but could build stock as early as August, with activity picking up steam as the quarter progresses. But investment buying through bars and coins is likely to persist in line with the current trend: from January to March, bar and coin demand rose by 19% year-on-year to 41 tonnes.”

The discount on domestic gold prices relative to international prices has reduced from $24 per ounce in March and $10 per ounce in April to $6 per ounce by mid-June. This decrease in the discount, even after Akshaya Tritiya, indicates ongoing interest in gold buying during what is typically a low-demand period.

Indian gold ETFs experienced a significant turnaround in May, with net inflows reaching INR 8 billion, a sharp contrast to the INR 4 billion outflows from the previous month and well above the 12-month average of INR 4 billion. This increase brought collective gold holdings to 46 tonnes, marking a monthly increase of 1 tonne and an annual rise of 8 tonnes. Additionally, the number of gold ETF folios grew by 136,772, reaching a total of 5.3 million, indicating sustained investor interest in gold as a financial asset.

The RBI’s gold purchasing activity has remained consistent throughout the year. According to RBI data and our estimates, the central bank acquired 3.7 tonnes of gold in May and an additional 2.8 tonnes in the first week of June, bringing the total gold purchases in 2024 to 30.6 tonnes. This has elevated the RBI’s gold holdings to a new high of 834.2 tonnes, which now constitutes 8.7% of the total forex reserves, a level not seen since April 2013.

Kavita Chacko, Research Head, India, World Gold Council, notes, “The RBI has emerged as a significant contributor to global central bank gold purchases this year, following Turkey and China. If the trend of gold buying seen in the first five months of the year continues, the RBI’s annual gold acquisitions could be comparable with the (net) 77.5 tonnes bought in 2021. However, the next few months will provide a clearer picture of the bank’s buying trend.”

Chacko further explains, “Alongside building its reserves, the RBI has been restructuring the storage of gold over recent years. According to its report on foreign exchange reserves, the central bank has been bringing some of its gold previously held overseas to India. This move appears to be motivated by logistical as well as strategic considerations and does not have financial implications, nor does it affect the RBI’s overall gold reserves. Furthermore, the government has granted the RBI an exemption from customs duty on gold imports.”

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Despite high gold prices, May continued the positive trend from April with gold import values reaching $3.3 billion, representing a 7% month-on-month increase but a 10% decrease year-on-year. In volume terms, it is estimated that gold imports in May were around 45 tonnes, up from 43 tonnes in April but significantly lower than the 63 tonnes imported in May 2023 when prices were 20% lower.

Chacko’s research attributes the rise in gold prices to factors such as a decline in bond yields, expectations of an easier monetary policy, geopolitical tensions, and weakness in the US dollar. However, the impact of these factors varied across currencies, with the Indian gold price influenced by the stable domestic currency.

Indian gold ETFs continue to attract sustained inflows, reflecting growing investor interest supported by strong price performance. In contrast, the Reserve Bank of India (RBI) has paused its gold purchases in November after being a net buyer for eight of the first eleven months in 2023, adding 16.2t to its gold holdings.

Kavita said ”RBI data and our estimates indicate that the central bank did not purchase gold in November,15 the first pause in six months. During eight of the first eleven months of 2023, the RBI has been a net buyer of gold, adding a total of 16.2t to its gold holdings. This is however notably lower demand than previous years. Annual net gold purchases by the RBI averaged 47t from 2018 to 2022.16 The central bank’s gold reserves as at the end of November are estimated to be 803.6t. During 2023, it has been buying an average 1.5t of gold per month.”

Despite India’s robust economic growth driven by healthy consumption demand and government investment, the high gold prices have affected the domestic gold market. Anecdotal evidence indicates lower purchases during the busy wedding season, with jewelry sales volumes taking a hit. The high gold prices have also limited jewelers’ appetite to build inventories, leading to increased jewelry recycling and potentially curbing imports.

Chacko highlighted that the World Gold Council’s econometric analysis shows that over the long term, income and price are the main drivers of gold demand in India. Rising income positively correlates with gold demand, while higher prices have a dampening effect. Looking ahead, jewelry demand may struggle to rebound in the current high-price environment, but investment demand is expected to receive a boost from favorable domestic economic growth prospects.

High gold prices and soft demand have reduced the volume of gold imports, despite a 35% increase in import value. Cumulative imports for the first ten months of 2023 were 2% higher y/y in volume but 12% higher in value, mainly due to the 15% y/y increase in prices. Monthly import volumes fluctuated, with a notable increase in Q3 attributed to the festive season.

Kavita said ”Looking ahead, jewellery demand may find it difficult to rebound while the high price environment remains. At the same time, investment demand for gold is likely to get a boost, supported by the favourable domestic economic growth prospects and the trend of growing domestic investment inflows amidst the prevailing global geo-political and economic uncertainty.”

As of late October 2023, domestic gold prices in India have been trading at a discount to international prices, reflecting subdued local demand. Despite the steep discount, the demand scenario remains muted, with physical demand impacted not only in India but also in other regions, such as China, where premiums have narrowed from previous highs.

Krishan Gopaul, Senior Analyst, EMEA at World Gold Council, foresees a potential breakthrough in central bank gold buying, surpassing the 2022 record. In a recent analysis, Gopaul stated, “Even before October’s net buying, we noted that 2023 was likely to be another colossal year of central bank buying. Having started Q4 positively, this year’s central bank demand looks set to climb even higher.” In 2022, central banks acquired 1,136 tons of gold, and as of Q3 2023, around 800 tons have been purchased.

October witnessed global central banks adding a net 42 tons to their official gold reserves. The People’s Bank of China led the way, followed by the Central Bank of Turkey and the National Bank of Poland. Despite a slowdown in October, the overall trend of robust buying remained intact, capturing the attention of gold investors. Global net purchases totaled 42 tons during the month, marking a 41% decrease from September’s revised total of 72 tons but still 23% above the January-September monthly average of 34 tons.

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Krishan Gopaul highlighted that a few banks globally accounted for the majority of gold acquisitions. The People’s Bank of China reported adding 23 tons to its reserves, marking the twelfth consecutive monthly addition. Despite this significant increase, reported gold reserves still constitute just 4% of the bank’s total international reserves. The Central Bank of Turkey made a noteworthy addition, purchasing 19 tons, bringing its official gold reserves to 498 tonnes. On a year-to-date basis, the central bank remains a net seller (44 tons) due to heavy net sales between March and May.

Other banks with more modest purchases in October included the National Bank of Poland, adding 6 tons, and the Reserve Bank of India (3 tons), the Czech National Bank (2 tons), the National Bank of the Kyrgyz Republic (1 ton), and the Qatar Central Bank (1 ton).

Krishan Gopaul revealed a higher volume of sales in October compared to August and September, driven by the Central Bank of Uzbekistan (11 tonnes) and the National Bank of Kazakhstan (2 tonnes). Both banks frequently shift between net buying and selling, a common practice among banks acquiring gold from domestic sources.

In summary, Krishan Gopaul’s report indicates that 2023 is poised to be another monumental year for central bank gold buying, with a positive outlook for demand as the year progresses.