Gold Reserves of RBI Touches All-Time High, Gold ETF Inflows in February Highest in Six Months

Even though gold prices have shot up, the Central Bank of the country’s gold reserves have touched an all-time high. Gold acts as an effective hedge during times of uncertainty and geopolitical tensions. Domestic demand, however, remains muted in February.

Kolkata: The Reserve Bank of India added 4.7 tonnes of gold in February, taking its gold reserves to an all-time high of 817 tonnes. Retail investors, too, have increased their exposure to the yellow metal through Exchange Traded Funds (ETFs). Indian Gold ETFs saw inflows of US$93.3mn in February, the strongest monthly inflow for six months, according to the World Gold Council (WGC).

The WGC expects that 2024 will be another solid year of Central Bank gold demand. Central Banks, particularly those in emerging markets, have shown since 2010 that they have a long-term strategy towards gold accumulation. As for why Central Banks are continuing to add gold to their reserves, WGC’s Central Bank gold survey remains instructive. Last year Central Banks across the world placed great emphasis on gold’s value in crisis response, diversification attributes and store-of-value credentials. A few months into 2024 the world seems no less uncertain meaning those reasons for owning gold are as relevant as ever.

In India, the domestic gold prices rose to all-time highs, reaching Rs 66,529 per 10 gm in early March, up 4% month till date, a slightly lower percentage increase than the USD counterpart (over 6%) due to the strengthening of the rupee.

The gold price surge has dented consumer demand in the country. As a consequence, the domestic gold price is now trading at a discount of around US$20 per ounce at the B2B level to the international price. The WGC said that the price surge presents headwinds for gold demand, even in the face of the ongoing wedding season. Despite elevated prices and soft jewellery demand, gold imports in February.