RBI earns over 40% returns from its gold reserves
The Reserve Bank of India is sitting on handsome returns on its gold reserves despite the recent crash in the yellow metal's price.
The RBI's gold stock of about 400 tonnes, currently valued at $25.7 billion, has appreciated 41% since it bought 200 tonnes in October-November 2009 from the International Monetary Fund.
During the same period, returns from alternative liquid assets were just one fourth of gold. Prices of US treasuries rose only by 5.2%, while that of the benchmark Japanese government bond increased 11.4%.
The central bank values its gold at 90% of the value of the London Bullion Exchange at the end of every month. Even if one factors in the crash in gold prices in April, the value of its gold reserves is substantially higher than the returns from other currencies in its reserves.
The share of gold in its $295-billion foreign exchange reserves is 8.7%, up from less than 5% at the time of the purchase from IMF. India holds most of its reserves in liquid assets such as hard currencies like dollar, yen and euro, and sovereign bonds of AAA-rated nations.
The RBI had purchased 200 tonnes of gold for $6.7 billion from the IMF under the multilateral body's limited gold sales programme. This was done as part of the RBI's foreign exchange reserves management operations.
The purchase was an official sector offmarket transaction and was executed over a two-week period from October 19 to October 30, 2009. Gold prices in the international market rose steadily for more than a decade. However, they rose rapidly in the last two to three years.
The RBI, as a part of its reserve management strategy, does not actively trade in its gold like some European central banks. In 1991, it had pledged its gold with international lenders to raise funds to tide over the balance of payments crisis.
The RBI's gold stock of about 400 tonnes, currently valued at $25.7 billion, has appreciated 41% since it bought 200 tonnes in October-November 2009 from the International Monetary Fund.
During the same period, returns from alternative liquid assets were just one fourth of gold. Prices of US treasuries rose only by 5.2%, while that of the benchmark Japanese government bond increased 11.4%.
The central bank values its gold at 90% of the value of the London Bullion Exchange at the end of every month. Even if one factors in the crash in gold prices in April, the value of its gold reserves is substantially higher than the returns from other currencies in its reserves.
The share of gold in its $295-billion foreign exchange reserves is 8.7%, up from less than 5% at the time of the purchase from IMF. India holds most of its reserves in liquid assets such as hard currencies like dollar, yen and euro, and sovereign bonds of AAA-rated nations.
The RBI had purchased 200 tonnes of gold for $6.7 billion from the IMF under the multilateral body's limited gold sales programme. This was done as part of the RBI's foreign exchange reserves management operations.
The purchase was an official sector offmarket transaction and was executed over a two-week period from October 19 to October 30, 2009. Gold prices in the international market rose steadily for more than a decade. However, they rose rapidly in the last two to three years.
The RBI, as a part of its reserve management strategy, does not actively trade in its gold like some European central banks. In 1991, it had pledged its gold with international lenders to raise funds to tide over the balance of payments crisis.
Source : ET
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