India’s forex reserves jump $4.5 billion to $690.6 billion — Is gold behind the surge?

Mumbai: India’s foreign exchange reserves rose by $4.553 billion to stand at $690.617 billion in the week ending 9 May, according to the latest data released by the Reserve Bank of India (RBI). The increase marks a recovery following a brief decline, extending a broader trend of gains seen in recent months.

The surge in reserves was driven largely by a notable rise in gold holdings, which jumped by $4.518 billion to $86.337 billion. India’s foreign currency assets (FCA), which form the largest portion of the reserves, were recorded at $581.373 billion.

This development follows a pattern seen among central banks globally, as they continue to bolster their reserves with gold amid geopolitical uncertainty. In fact, the RBI’s gold holdings have nearly doubled since 2021, reflecting a shift toward safe-haven assets.

Although the latest figure is just short of the all-time high of $704.89 billion recorded in September 2024, it underlines the resilience of India’s external sector. With reserves at current levels, India has sufficient cover for approximately 10–12 months of projected imports

In 2023, India added about $58 billion to its forex reserves, following a sharp drawdown of $71 billion in 2022. So far in 2024, reserves have increased by just over $20 billion.

The RBI actively manages the country’s foreign exchange reserves, using them to stabilise the rupee against sharp fluctuations. Typically, the central bank buys dollars when the rupee is strong and sells them when the currency faces depreciation pressures.