The Reserve Bank of India (RBI) sold about $12 billion in gold from its reserves in May, within just two weeks. According to the agency "Bloomberg," citing expert analysis, the aim of this move is to increase the volume of liquid foreign currency assets amid the escalating geopolitical situation in the Middle East.
Ensuring liquidity and its impact on the rupee
According to sources, as a result of the transactions, the Indian regulator managed to acquire around $7.5 billion in liquid foreign currency. This intervention helped stabilize the exchange rate of the national currency, the Indian rupee, which had come under pressure due to foreign capital outflows and rising costs of energy imports.
📍 Main factors of pressure.
Geopolitical tension. The escalation of the situation in the Middle East (particularly in the U.S.-Iran conflict zone) has increased economic risks:
Rising oil prices. India is the third-largest oil importer in the world. The increase in raw material prices has significantly raised the outflow of foreign currency from the country.
Liquidity priority. In the current conditions, the Central Bank has prioritized more liquid foreign currency reserves (FCA) over precious metals:
Future prospects and reserve structure
Bloomberg analysts note that in the near future, the Indian regulator may resume its traditional policy of replenishing foreign currency reserves if the dollar weakens in the international market, investment flows to emerging markets recover, and oil prices decline.
According to official RBI data, as of the end of March, the country's total gold reserves exceeded 880 tons. Moreover, about 77% of this volume is stored directly in India, while the majority of foreign-held assets are located in the Bank of England and the Bank for International Settlements (BIS).
