Business Daily from THE HINDU group of publications
Wednesday, Nov 04, 2009
ePaper | Mobile/PDA Version | Audio | Blogs
Business Daily from THE HINDU group of publications Wednesday, Nov 04, 2009 ePaper | Mobile/PDA Version | Audio | Blogs |
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Money & Banking
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Forex Agri-Biz & Commodities - Gold & Silver Web Extras - RBI & Other Central Banks Purchase of gold will help RBI diversify forex reserves Our Bureau Mumbai, Nov. 3 The Reserve Bank of India’s decision to purchase 200 tonnes of gold from IMF is seen as an effort on the central bank’s part to diversify its forex reserves holdings and reduce the dependence on the dollar. The dollar appears to be losing importance as a reserve currency. It has been weakening against other major currencies. Central banks across the world have started increasing their gold holdings to reduce their dependence on the dollar, said bankers and analysts. The RBI’s decision to buy gold from IMF is a prudent move. In relative terms, India’s gold holding is not very high. Among the various components of reserves, the share of foreign currency assets is the highest. So, the purchase of gold will help diversify forex reserves, said Dr Rupa Rege Nitsure, Chief Economist, Bank of Baroda. This purchase will make India one of the largest holders of gold among the emerging nations, next only to China. India’s total gold holding has increased from 358 tonnes to 558 tonnes. The Chinese central bank, The People’s Bank of China, has 1,054 tonnes of gold. As a percentage of India’s total reserves, gold’s share has increased from 3.5 per cent to 6.5 per cent, said Mr Sujan Hajra, Chief Economist, Anand Rathi Financial Services. Central banks across the globe have been buying gold as part of the strategy to diversify their holdings keeping in mind the prospective dollar weakness. Gold also serves as a very good inflation hedge and has seen good amount of interest from institutions and fund houses looking to protect the value of their assets, said Mr Hemant Mishr, Head-Global Market Business, Standard Chartered Bank. The Executive Board of the International Monetary Fund (IMF) had approved gold sales of 403.3 tonnes. However, the sale was conducted under the condition that the sale will be done in a responsible and transparent manner that avoids disruption of the gold market. The IMF had also decided that the initial offer of the sale of the gold would be directly to official holders, including central banks. Of this, Reserve Bank of India purchased 200 tonnes of gold from the IMF as part of its foreign exchange reserves management operations. Gold is a good safety net and considered a good investment. In 1991-92, India sold gold to meet the foreign currency requirements as the country did not have enough reserves to finance imports, Dr Nitsure added. More Stories on : Forex | Gold & Silver | RBI & Other Central Banks
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