Whalesbook
RBI's Gold Holdings Shift
The Reserve Bank of India (RBI) has made a major shift in how it manages gold reserves. Domestically stored physical gold has seen a significant reduction, falling to 290.37 metric tonnes by March 2026. This is a sharp drop from 575.82 metric tonnes in September 2025 and 511.99 metric tonnes in March 2025. Despite this decrease in domestic holdings, the RBI's total gold reserves remained relatively stable, inching up to 880.52 metric tonnes from 880.18 metric tonnes over the same period. Most of the RBI's gold is now held by international custodians like the Bank of England and the Bank for International Settlements (BIS), totaling 197.67 metric tonnes, plus 2.80 metric tonnes in gold deposits.
Gold's Share in Forex Reserves
Even with less gold stored domestically, gold's share of India's total foreign exchange reserves climbed to 16.7% by March 2026, up from 13.92% six months earlier. This jump in percentage is mainly because global gold prices rose sharply, increasing the value of current holdings without adding more gold. Total foreign exchange reserves fell slightly to $691.11 billion by March 2026 from $700.09 billion six months prior.
Global Trend: Central Banks Buy Gold
India's strategy matches a strong global trend where central banks are actively boosting their gold holdings. This buying is driven by global uncertainty, ongoing inflation worries, and a wish to move away from U.S. dollar assets. Emerging market central banks are leading this trend, looking for assets that are stable and move differently from major currencies. Central banks globally bought about 863 tonnes of gold in 2025, with demand expected to stay strong in 2026. This shows gold is still seen as a key reserve asset. Poland, China, and Uzbekistan are among the main buyers.
Onshoring Gold for Security
Bringing gold reserves back to India is a major part of this strategy. By March 2026, about 77% of India's gold, some 680 metric tonnes, was held domestically. This is a big jump from about 37% in March 2023. This faster move to bring gold home partly stems from global events, such as Russia's foreign assets being frozen. This has raised fears about the safety of keeping national assets abroad. Holding gold domestically gives more control and lowers risks related to foreign banks holding it.
Challenges of Holding Physical Gold
Although gold can protect against inflation and global unrest, keeping large amounts of physical gold at home involves challenges. Gold doesn't earn interest, unlike foreign currency assets that do. This creates an 'opportunity cost'. Storing much more physical gold domestically requires strong security systems and ongoing investment in vaults. While central banks buy a lot of gold, individual purchases, like the RBI's, usually don't move global prices alone. However, combined buying and market sentiment do influence prices. Reducing domestic physical holdings suggests a trade-off, possibly favoring security and global spread over immediate access or limits on domestic storage.
Gold's Enduring Role
Gold will likely remain strategically important in central bank reserves. With complex global economic and political situations, the RBI will likely keep focusing on diversifying reserves and securing assets. This means gold will continue to be vital for national reserves, balancing foreign currencies with a tangible asset. Analysts expect central banks to keep buying gold, strengthening its role as a global portfolio diversifier for countries.