RBI, the central bank of India keeps a substantial amount of gold reserves as a hedge. Recently a report released confirms that the RBI bought the highest amount of gold on a half-yearly basis this year. The central bank's gold reserves, in proportion to the Forex (foreign exchange) reserves, has crossed 700 tonnes for the very first time. Importantly, India's present Forex reserves are also at an all-time high figure at $620 billion.
The RBI has purchased a record of nearly 29 tonnes of gold in proportion to the Forex reserves in the first half of 2021. Now the bank's total gold reserves is standing at 705.6 tonnes till 30th June 2021. This data saw a 27% hike in the last 2 years. The gold reserve of the RBI was 558.1 tonnes at the start of 2018. However, the report also stated that the gold reserve since then has plunged to 6.55 in the June 2021 quarter than 7% at the end of March.
In June 2021, the bank's gold reserve among all central banks globally was around 30% - according to the World Gold Council (WGC). The WGC data informs that all of the central banks cumulatively purchased 32 tonnes of gold. At the same time India's share was around 9.4 tonnes. At the present time, the RBI is standing at the 10th position among all recognised central banks globally in terms of their gold reserves.
Reports have been coming since last year that the RBI is thinking of increasing the amount of gold reserve to itself. The RBI was reportedly looking to increase the gold reserves to 10% of its total reserves than the current reserve at 6.5%. So, the bank was quite focussed on the precious metal to have a substantial hold on the economy even when the overall economic situation was trembling in the last year.
Stressing on that matter, WGC added in a report, "Central banks are likely to continue buying gold on a net basis in 2021 at a similar or higher rate than in 2020, driven by a continued focus on diversification and risk management." It states that the central banks globally bought 333 tonnes of gold in the first half of 2021. It is also 39% more than the average of the first half of the last 5 years.
The available data informs the gold reserves of different countries and how they increased their gold purchases. Thailand, Hungary, and Brazil are the largest buyers of gold in the first half of 2021. They all together bought 207 tonnes of gold. In the first half of 2021, Thailand has purchased 90.19 tonnes of gold, Hungary 62.09 tonnes, Brazil 53.74 tonnes, Uzbekistan 25.50 tonnes, and India has purchased 28.99 tonnes precisely. Thailand's total gold reserves have now increased to 244.2 tonnes, Turkey's 408.2 tonnes, Brazil's 121.1 tonnes, and Poland 231.8 tonnes. These are some countries with the highest gold reserves at the present time.
Central banks around the globe expected that the inflation rates were going to reach far higher in the first half of this year, which has also proved to be true. Even in India, the inflation rate was highest in the last decade in May 2021. As gold is a safe investment against inflation and does not reduce its value during economic crises, central banks focussed on the yellow metal. As the inflation will go down the RBI might decrease the rate of its gold purchase.