India’s central bank is likely to join counterparts in Russia and China scooping up gold this year, adding to its record holdings and lending support to worldwide bullion demand as top economies diversify their reserves.
The Reserve Bank of India’s purchases are part of a wider picture across developing economies that are looking at de-dollarizing their foreign-exchange reserves, according to Ross Strachan at Capital Economics Ltd. The RBI’s buying trend can be sustained for a number of years in relatively small quantities, as part of a long-term diversification, he said.
Read More : Commodity Gold Report: Gold in Desperate Need of a Renewed Safe Haven Buying
Central banks in Russia and China are also adding to holdings
The RBI may purchase 1.5 million ounces in 2019, or about 46.7 tons, according to Howie Lee, an economist at Oversea-Chinese Banking Corp., with an outlook based on extrapolating amounts bought in the first two months of this year.
The RBI increased its stash by about 42 tons last year, and after adding more in January and February, the country’s gold reserves now stand at a record high of almost 609 tons, according to data from the International Monetary Fund.
Russia bought 274 tons in 2018 and has added more this year, while China’s central bank is on a renewed buying spree that began in December. Global official sector gold purchases Central Banks to Increase Gold Purchases in 2019, Citigroup Says could reach 700 tons in 2019 led by these countries as well as Kazakhstan, Iran, and Turkey, according to Citigroup Inc.
Read More : Gold, Silver Tumble On Heavy Volume As Dollar Explodes Higher
Heightened geopolitical and economic uncertainty pushed central banks to diversify their reserves and focus on investing in safe and liquid assets, with governments worldwide adding 651.5 tons of bullion last year — the second-highest total of purchases on record, according to the World Gold Council.
Further inflows — expected to run as high as 2018 as China, Russia, and Kazakhstan buy –should also be Goldman Bullish on Outlook for Gold as ETFs, Central Banks Buy supportive of prices, according to Goldman Sachs Group Inc. Spot gold has lost about 5.6 percent since a peak in February as equities rallied.
There seems to be some form of pattern, not just the RBI, that central banks tend to increase gold reserves when the global macroeconomic environment is uncertain,” OCBC’s Lee said. “It’s no coincidence that one of the biggest buyers of gold in recent months was China, which is in the midst of trade tensions with the U.S. and may have been seeking to diversify its trillions of dollar reserves.” India may be following a similar tactic of diversification, he said.
India’s gold holdings are the 10th-largest by country, they account for only 6.4 percent of its reserves, compared with more than 70 percent in Germany and the U.S., WGC data show.
