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RBI says gold reserve fluctuation stems from change in valuation frequency

Gold value in reserves changing more frequently since central bank accepted Jalan panel report.

, ET Bureau|
Updated: Oct 27, 2019, 12.39 PM IST
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Analysts said the stock of gold in forex reserves has traditionally been revalued only once a month.

Commodity Summary
MCX

GOLD
MUMBAI: The Reserve Bank of India (RBI) said the fluctuation in its gold reserves data was due to a change in the valuation frequency, rejecting speculation that it may have been selling the metal.

RBI’s weekly statistical supplement data suggested that since the beginning of July, the start of the central bank’s business year, it had bought gold worth $5.1 billion and sold about $1.15 billion of the yellow metal. The value of gold in the country’s forex reserves amounted to $26.7 billion on October 11. ET had reported the data online October 26.

RBI said in a tweet over the weekend that the fluctuation was due to a change in the frequency of the valuation and is based on international gold prices and that it had not sold any of the metal. The valuation has traditionally been based on end-of-the-month prices.



The total amount of gold with RBI at the end of August was 19.87 million troy ounces, according to the latest data. This was about the time that the central bank accepted the Bimal Jalan committee report on its capital framework. The committee recommended that, after providing for various risk buffers, which could be 5.5% to 6.5% of the RBI's balance sheet, the entire realised surplus can be transferred to the government.

The central bank appears to have started trading in gold more actively since adopting the report, going by the data. The Jalan committee was set up last year in the wake of the debate over sharing the RBI’s surplus income with the government to fund its deficit.

Market analysts said that the stock of gold in forex reserves has traditionally been revalued only once a month. Any changes in the interim weeks could be attributed to the purchase or sale of gold. But some former central bank officials didn’t rule out the possibility that RBI had changed the gold value reporting format. RBI hadn’t responded to ET's queries on Friday. It doesn’t disclose the volume of gold in its vaults at regular frequency.

Central banks globally are diversifying foreign exchange reserves by holding some portion of this in the form of gold. India has been buying gold sporadically since November 2017 and has acquired close to 2 million troy ounces since then. While most of this is purchased from the open market, some of it comprises smuggled gold confiscated by the customs authorities from time to time.

Sources close to RBI said it’s likely that the central bank has sold some of the gold it’s bought recently. RBI may also be trading in gold as part of treasury operations, the way it trades in currencies, they said.

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