India’s Forex Reserves Drop to $634.59 Billion; Gold Holdings Rise by $824 Million
India's foreign exchange reserves fell by $5.7 billion to $634.59 billion for the week ended January 3, according to data released by the Reserve Bank of India (RBI) on Friday. Despite the decline in overall reserves, gold holdings surged by $824 million, reaching $67.1 billion during the same period.
Mumbai: India’s foreign exchange reserves fell by $5.7 billion to $634.59 billion for the week ended January 3, according to data released by the Reserve Bank of India (RBI) on Friday. Despite the decline in overall reserves, gold holdings surged by $824 million, reaching $67.1 billion during the same period.
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RBI Boosts Gold Reserves Amid Global Buying Trend
The RBI added 8 tonnes of gold to its reserves in November 2024, following a global central bank buying spree that saw 53 tonnes of gold purchased worldwide, as per the World Gold Council (WGC) report.
With this addition, the RBI has accumulated 73 tonnes of gold in the first 11 months of 2024, bringing its total gold reserves to 876 tonnes. This positions India as the second-largest gold buyer of the year, behind Poland.
Gold Prices Surge as Investors Seek Safe-Haven Assets
Gold and silver prices remained strong despite a strengthening U.S. dollar in global markets.
- Gold prices rose by 1.3%, while
- Silver surged over 3% in the past week.
Investor interest in safe-haven assets has increased ahead of January 20, the day Donald Trump assumes the U.S. Presidency.
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“Safe-haven buying is driving gold and silver higher. The market focus will be on Trump’s policy direction, with additional support coming from fresh buying by ETF investors,” said Pranav Mer, Vice President at JM Financial Services Ltd.
RBI’s Forex Strategy and Rupee Stability Measures
The RBI utilizes forex reserves to manage rupee volatility caused by foreign investors pulling out funds from the Indian stock market. By releasing dollars into the market, the RBI prevents a sharp depreciation of the rupee, ensuring currency stability.
RBI Deputy Governor Rabi Sankar reaffirmed the central bank’s preparedness to handle exchange rate fluctuations that may arise due to changes in U.S. economic policies under Trump’s administration. He also dismissed the idea of granting European oversight over India’s bond-clearing platform, stating that it would amount to a sovereignty breach.
Robust Forex Reserves Key to Rupee Strength
A strong forex reserve base is essential for:
- Managing currency fluctuations
- Stabilizing the rupee during market uncertainties
- Boosting investor confidence in the Indian economy
As India continues to navigate global economic shifts, the RBI’s forex strategy and gold acquisitions will play a crucial role in ensuring financial stability.
