Source: Cailian
Financial Associated Press, October 29 (Editor Niu Zhanlin)India has significantly accelerated the return of gold since Western countries froze Russia’s massive foreign exchange reserves, with the central bankly currently holding more than 65% of its gold reserves at home, almost doubling the proportion four years ago.
On Tuesday, local time, the Central Bank of India’s semi-annual foreign exchange reserves report showed that in the first half of the fiscal year as of September, the central bank returned about 64 tons of gold to the country.With international gold prices rising, the share of gold in Indian foreign exchange reserves rose to 13.92% at the end of September, up from 11.70% at the end of March.
As usual, the Central Bank of India deposits some of its gold in overseas institutions such as the Bank of England and the Bank for International Settlements (BIS).
Data show that the Reserve Bank of India holds a total of 880 tons of gold, of which 576 tons are stored domestically (accounting for 65%), a record high. In contrast, in September 2022, the proportion of domestic deposits was only about 38%.
The Bank of India did not explain the specific reasons for this adjustment, but market participants generally interpreted it as a defensive layout after "Russia's foreign reserves were frozen". After the outbreak of the Russia-Ukraine conflict in 2022, the United States and Europe jointly frozen the Russian central bank's foreign reserves of about US $300 billion, triggering a reassessment of "overseas asset security" by many countries.
In the past four years, India has returned nearly 280 tons of gold. Indian Finance Minister Nirmala Sitaraman said last month that the central bank was making a "very prudent decision" to diversify foreign exchange reserves, with gold being a key link.
In addition to the return of gold, the Bank of India is also one of the world's major gold buyers, and it is committed to reducing its dependence on the US dollar and related assets. In recent years, the Central Bank of India has continued to reduce its U.S. debt holdings, which had continued to fall long before the Trump administration imposed a 50% punitive tariff on it.
As of 17 October, India’s total foreign exchange reserves amounted to $70.2 billion, ranking fourth in the world, enough to cover more than 11 months of import demand, making it one of the most buffering emerging markets in Asia.
The global gold return trend is increasing.
Analysts say that in an era of frequent geopolitical conflicts and the weaponization of financial sanctions, countries around the world are now increasingly cautious about storing sovereign assets overseas.
Ritesh Jain, founder of asset management firm Pinetree Macro, said: “In a world where international law is ignored and the G7 countries openly freeze their foreign exchange reserves, the central bank of India should speed up the pace of returning gold home.”
He added: "In fact, we are surprised that there is still a large amount of gold stored overseas. My opinion is clear. In this new era full of uncertainty, if gold is not in your control, then it cannot truly count as your gold."
In addition, the Central Bank of Serbia also announced in July that it would ship all its gold reserves back to China, becoming the first Eastern European country to store all its gold reserves within its own territory. An official at the country's central bank said: "By shipping gold back to the country, the central bank of Serbia hopes to improve the accessibility and security of gold reserves during times of crisis and uncertainty."
Serbia's central bank claimed that it carefully weighed the pros and cons before deciding to return gold: if gold was stored in market centers such as London or New York, it would be easier to sell or borrow, but ultimately decided that "the safety of gold kept domestically is much higher than the convenience of trading."
It is widely speculated that other central banks have also quietly withdrawn gold from New York, but it is difficult to verify because of the lack of transparency of the New York Federal Reserve.
A recent survey by the World Gold Council (WGC) showed that a "significant proportion" of central banks expressed concerns about potential sanctions after the United States and Western countries froze Russia's foreign exchange reserves. WGC pointed out that 68% of central banks surveyed plan to keep gold reserves in their own countries, compared with only 50% in 2020.