The RBI decision to bring back 100 tonnes of gold reserves from the UK to India reflects the confidence of the central bank in managing the reserves dynamically amid the growing global economic uncertainty.

The gold purchased by RBI in the UK are usually stored in the Bank of England vault and it is also used as hedge for clearing global transactions.

RBI has been on a gold-buying spree and added 25 tonne of gold since the start of the year taking the overall gold holding to a new peak of 822 tonne as of April-end.

The central bank’s net gold acquisitions in this year has already exceeded last year purchase of 16 tonnes. On average, the RBI has been purchasing about 6 tonnes of gold a month this year. As of early May, gold comprises 8.5 per cent of total reserves, up from 7.7 per cent at the close of 2023.

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Ajay Kedia, Director, Kedia Commodities, said, with the UK just coming out of economic recession and going to election next month, there are lot of uncertainties brewing which would have led to RBI bring back the gold into India.

Saving costs

RBI, which has been an active buyer of gold amid rising prices, will also save on vaulting and insurance costs by storing its precious reserve in India, he added.

Of the overall gold holding of 822 tonnes, RBI holds about 414 tonnes abroad due to convenience of storing it in the country where it buys. The central bank also saves on the logistics cost and other incidental expenses by vaulting it offshore.

Paving the way for smooth transportation of gold reserves to India, the government has waived off the import duty of 15 per cent and 5 per cent agriculture infrastructure development cess on gold imported by the RBI.

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Given the rise in gold reserves, sources said that RBI may move in another 100 tonnes of gold back to India in coming days.

Incidentally, RBI has joined central bank of other countries in moving the gold reserves to homeland particularly after Russia’s gold reserves stored in other countries was frozen following the US economic sanctions.

Russian attack on Ukraine has led to the US imposing economic sanctions on the former though it was not implemented in toto.

Since late last year, all the major central banks are moving their gold reserves back home given the volatile global developments including the unrest in West Asia and conflict between Iran and Iraq.