Aligning with a global trend of central banks boosting gold holdings, the Reserve Bank of India (RBI) has increased its share of gold in the foreign exchange to 11.70% (879.59 metric tonnes).
- India’s gross foreign exchange reserves comprise foreign currency assets of the Reserve Bank, gold held by RBI, Special Drawing Rights (SDRs) and Reserve Position in the International Monetary Fund(IMF).
- Reserve Position in the IMF is not included as part of foreign exchange reserves by some countries as they may not be available on immediate demand.
Why are Central Banks around the world hoarding gold?
- Diversification away from the US Dollar: Central banks are diversifying their reserves away from the dollar to reduce their exposure to potential dollar devaluation.
- Hedging against Inflation: With global inflation rates on the rise, gold acts as a hedge against the eroding purchasing power of countries’ currencies.
- Geopolitical Risks: With tensions between major powers like the US, China, and Russia creating uncertainty, gold offers better security than fiat currencies or government bonds.
- Fiat currency refers to a government-issued currency that isn't backed by a physical commodity like gold or silver.
Risk Associated with storing gold
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