India’s Forex Reserves Decline by $5.7 Billion, RBI Increases Gold Holdings Amid Global Uncertainties
India’s foreign exchange reserves fell by $5.7 billion, standing at $634.59 billion for the week ending January 3, 2025, according to data from the Reserve Bank of India (RBI). However, the country’s gold reserves, part of its overall forex holdings, rose by $824 million to reach $67.1 billion.
In line with its strategy to safeguard against global uncertainties, the RBI purchased 8 tonnes of gold in November 2024, bringing its total gold holdings to 876 tonnes, with 73 tonnes purchased in 2024 alone. Globally, central banks collectively bought 53 tonnes of gold in November, with India ranking as the second-largest buyer, after Poland.
Gold and Silver Surge Despite Strong Dollar
Despite a stronger U.S. dollar, gold and silver prices rose due to safe-haven buying ahead of political transitions, including Donald Trump’s inauguration as U.S. President. Pranav Mer, Vice President at JM Financial Services, noted the increase reflects investor concerns over economic and geopolitical changes.
RBI’s Role in Managing Rupee Volatility
The RBI actively uses its forex reserves to stabilize the Indian rupee, particularly during periods of capital outflows triggered by foreign investors selling shares. Deputy Governor Rabi Sankar emphasized that the central bank is prepared to counter excessive exchange rate volatility and ensure currency stability.
The robust forex reserves provide the RBI with the capability to release dollars into the market when needed, preventing significant depreciation of the rupee while maintaining overall economic stability.
