India has taken a monumental step in global economics by emerging as the world’s largest gold buyer in 2024. This strategic move, led by the Reserve Bank of India (RBI), signals a shift in India’s financial approach and aligns with the broader trend of de-dollarisation. Let’s dive into the significance, strategies, and implications of this development.
India’s Record-Breaking Gold Purchases
According to the World Gold Council, India purchased a staggering 27 tons of gold in October 2024 alone, pushing its total gold reserves to 882 tons. For the year 2024 (January-October), the RBI accounted for 77 tons of gold purchases, marking a fivefold increase compared to 2023.
This achievement places India ahead of other global gold buyers like Turkey, Poland, and China, emphasizing the dominance of emerging markets in gold accumulation.
Why Is India Buying Gold?
The increased gold purchases can be attributed to several strategic reasons:
1. Countering Dollar Weaponisation
- The geopolitical landscape, particularly the Ukraine war, highlighted the risks of reliance on the US dollar.
- Dollar reserves were weaponised against Russia, freezing its assets. This has prompted nations, including India, to diversify away from the dollar.
2. Hedging Against Geopolitical Risks
- Gold serves as a safe haven during times of global uncertainty.
- By increasing its gold reserves, India aims to protect its economy from currency volatility and global inflation.
3. De-Dollarisation Strategy
- India is silently reducing its dependence on the dollar by increasing gold reserves and promoting local currency trade agreements with countries like Russia, the UAE, and Sri Lanka.
- These bilateral agreements bypass the US dollar, fostering financial independence.
Gold Reserves: A Tool for Stability
Key Benefits of Gold Accumulation:
- Currency Stability: Gold reduces the impact of exchange rate fluctuations.
- Inflation Control: As a hedge, gold stabilises foreign exchange reserves during inflationary pressures.
- Strategic Security: In times of economic sanctions, gold offers liquidity and financial flexibility.
Global Context of Gold Buying
Emerging Markets Lead the Way
India, Turkey, and Poland dominate global gold purchases, while Western economies hold significant reserves accumulated during the colonial era.
- Developed countries like Germany and France already have 50%-70% of their foreign exchange reserves in gold.
- India, on the other hand, has increased its gold reserves to 10% of its total forex assets, the highest among Asian G20 nations.
Gold Repatriation
In a bold move, India repatriated 214 tons of gold from the Bank of England in 2024, ensuring that 510 tons of its reserves are now domestically held. This represents 60% of India’s total gold reserves, with plans to bring back more.
Also Read: India Brings Back 102 Tonnes Gold from Bank of England
Implications of De-Dollarisation
1. Shifting Power Dynamics
The dominance of the US dollar in global reserves has declined from 70% to 59% over the past 15 years. India’s actions could accelerate this trend.
2. Strengthening BRICS Alliance
India’s de-dollarisation aligns with the BRICS nations’ call for alternatives to dollar dominance. Though India opposes a unified BRICS currency, it actively supports trade in local currencies and an alternative to the SWIFT payment system.
3. Economic Independence
By diversifying reserves, India is ensuring its economy remains resilient against external shocks, sanctions, and currency weaponisation.
Conclusion
India’s record-breaking gold purchases in 2024 highlight a well-thought-out strategy of financial diversification and reduced dollar dependence. This silent yet powerful move positions India as a key player in the evolving global economic order.
As the world watches, India’s steps toward de-dollarisation underscore its preparedness to navigate future geopolitical and economic challenges.
Your Thoughts?
What do you think is the primary reason for RBI’s rapid gold accumulation in 2024?
- A. Stabilising domestic gold prices
- B. Diversifying foreign currency assets and reducing dollar reliance
- C. Supporting large-scale industrial gold usage
- D. Meeting public demand for gold jewellery
Share your answers in the comments below!
Disclaimer: This blog post is based on publicly available information and expert analyses. Please refer to trusted financial sources for investment decisions.
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