RBI acquires 57.5 tons of gold in FY25 amid global financial instability

The Reserve Bank of India (RBI) acquired 57.5 tons of gold in FY25, bolstering its reserves of safe-haven assets as gold prices surged by over a third amid global financial instability.

This move reflects the growing trend among central banks worldwide to increase their gold holdings, as it acts as a reliable inflation hedge, especially during periods of dollar volatility.

This acquisition marks the RBI’s second-largest annual gold purchase since it began building its reserves in December 2017.

Various factors, such as geopolitical tensions, US dollar fluctuations, and concerns over US government bonds, have driven central banks globally to stockpile more gold as a risk management strategy.

By March 2025, RBI’s total gold holdings reached 879.6 tons, up from 822.1 tons in the previous year.

The central bank’s largest acquisition took place in 2021-22 with 66 tons, followed by purchases of 35 tons and 27 tons in FY23 and FY24, respectively.

The fluctuating US dollar, particularly after Donald Trump's election in November 2024, has further boosted gold’s appeal as a stable investment.

Sajal Gupta, Head of Currencies and Commodities at Nuvama, noted, "All global central banks are reducing reliance on US Treasuries and shoring up gold reserves."

The World Gold Council's 2024 report highlights central banks as key drivers of global gold demand, with their purchasing strategies closely tied to economic conditions and geopolitical developments.

India’s foreign exchange reserves now feature a higher percentage of gold, rising to 11.8% as of April 11, 2025, compared to 8.7% last year.

This increase is also aided by the appreciation of gold prices, which rose by more than 30% during this period.

RBI ranks among the top 10 central banks worldwide in terms of gold holdings.

Unlike some of its counterparts in countries like Turkey, Switzerland, or China, the RBI rarely divests its gold due to political considerations.

As outlined in the Reserve Bank's most recent "Half Yearly Report on Management of Foreign Exchange Reserves," the primary goals of reserve management in India are safety and liquidity, with return optimization considered within this framework.

RBI uses gold acquisitions to protect against currency volatility and to mitigate reserve revaluation risks.

However, recent data suggests a slowdown in gold purchases. After averaging 6.6 tons per month from January to November 2024, the RBI paused its gold buying in December and February, with January and March acquisitions falling below the usual monthly averages.

A recent World Gold Council report suggests this pattern might indicate a more cautious approach, though it highlights the growing strategic importance of gold in India’s reserves management.