Central banks are on a buying-spree in the gold market. For the third consecutive year, gold buying by central banks topped 1,000 tonnes. In 2024, central banks purchased a record 1,180 tonnes of gold after buying 1,082 tonnes in 2022 and 1,037 tonnes in 2023.
Here’s how much gold countries have in their kitty. The US is the largest holder, with 8,133 tonnes of gold reserves valued at $682,276 million, while India has 876 tonnes, valued at $73,498 or nearly $73 billion of gold holdings!
But, why are central banks going gaga over gold?
Gold has always been a reserve asset for the global banks. Of late, inflation and geopolitics emerged as the two main reasons for central banks accumulating gold.
Central Bank’s Gold Buying in Recent Times
Inflation in post-Covid years led to gold becoming a haven for governments’ reserve assets due to uncertainty and unpredictability. Russia’s invasion of Ukraine in 2022 and the geo-political tensions escalating with Israel, China, and Taiwan undergoing varying levels of conflict, the central banks resorted to accumulating gold in large numbers.
Our own government has been relying on gold for long. Talking of recent times, in 2024, India became the second largest gold buyer after Poland, which purchased 89.54 tonnes of gold. India bought 72.60 tonnes, and China ended up buying 44.17 tonnes.
Source: WGC
Gold Holding of Indian Government
And, what about India’s gold reserves and where are they stored?
The Reserve Bank held 854 metric tonnes of gold as of September 2024, with 510 metric tonnes held domestically. India still has 324 tonnes of its gold stored in the vaults of the Bank of England and the Bank for International Settlements (BIS), both based in the UK.
But, why the Bank of England? Some of the world’s biggest gold owners including the US, Germany, Italy, France, China, Switzerland and India, hold their gold in Bank of England vaults. After all, the London Bullion Market offering high liquidity and ease of trading is the largest global centre for over-the-counter wholesale transactions of gold.
India Transferring Gold from London
Something interesting happened with India’s gold reserves in 2024.
India brought back a large amount of gold in two consignments in 2024. In May 2024,
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