Central banks reducing dependence; diversifying into gold

According to RBI, Central banks are diversifying into gold and reducing dependence on the dollar as a reserve currency. “The recent expansion in gold holding has been driven mainly by emerging market economies (EMEs), attributed to the general increase in the level of reserves in the aftermath of GFC, diversification strategy that moved away from the dollar, and the use of gold as an alternative asset by those countries on which economic sanctions have been imposed,” the central bank said. In terms of gold purchase, the top five countries are — Russia, China, Kazakhstan, Turkey and India.

The RBI had also said that during the year under review, foreign exchange reserves increased by 5.9% in June 2019 as against an increase of 5% in the corresponding period of the previous year, and gold was added to the reserves in line with the broad diversification objectives, the central bank informed.