Government rejects claim that RBI sold gold to boost revenues

The Centre has rejected a Bloomberg Economics analysis that suggested the Reserve Bank of India may have sold gold reserves to bolster the country’s foreign-currency assets. The Bloomberg Economics report estimated that the RBI likely sold around $12 billion worth of gold in the two weeks through May 22 while purchasing roughly $7.5 billion in foreign-currency assets. The assessment was based on publicly available RBI data and changes in the reported value of the central bank’s reserves. According to the analysis, the reported value of the RBI’s gold holdings fell during the period despite an increase in import duties on gold. Since higher duties would normally support the value of gold holdings, Bloomberg Economics argued that the decline pointed to possible gold sales by the central bank. The report linked the estimated sales to growing pressure on India’s external accounts. Rising crude oil prices, continued capital outflows, and the economic fallout of the conflict in the Middle East have increased scrutiny of India’s foreign-exchange reserves and the RBI’s management of them. The analysis quickly drew attention because it suggested the central bank may have used part of India’s gold stockpile to strengthen its foreign-currency position during a period of market stress. However, the government has disputed that conclusion. Officials rejected the Bloomberg Economics assessment and denied that the RBI had sold gold reserves to support India’s foreign-exchange assets. The episode has put an unusual spotlight on India’s reserve management strategy and highlighted how closely markets are tracking every movement in the country’s foreign-exchange and gold holdings. Source: Moneycontrol, Bloomberg Economics