RBI swapping its stock of US T-Bills with gold
The RBI added 0.41 million troy ounces, or roughly 12.75 tonnes, of gold to its reserves.
RBI sold US treasury bonds worth $14.4 billion between April and July this year, according to data released by the US treasury department on Wednesday.
During the same period, the RBI added 0.41 million troy ounces, or roughly 12.75 tonnes, of gold to its reserves, according to RBI data provided to the International Monetary Fund. The outstanding stock of gold in its reserves rose to 18.42 million troy ounces in July from 18.01 million troy ounces in March. After the US Fed increased rates in April, foreign investors have been withdrawing funds from emerging markets, causing their currencies to depreciate. RBI may have purchased the gold locally because the balance of payments data does not indicate that it was imported. RBI data says that gold stock in its reserves includes gold deposits, although it does not provide the break-up. Buying gold is significant because unlike many central banks such as the People’s Bank of China and some in Europe, the RBI does not regularly trade in gold, although the law permits it to do so.
With yield on treasury bonds rising, RBI could suffer mark-to-market losses on its bond portfolio. Of the $403.6 billion worth of reserves with the central bank as of end July, $240 billion were held in the form of bonds and securities, data submitted to the IMF show.