Gold Reserves Current Affairs - 2019
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As per the data revealed by Reserve Bank of India (RBI), India’s foreign exchange (Forex) reserve rose to a life-time high of $426.42 billion (in week to 21 June 2019) after it surged by $4.215 billion boosted by higher foreign portfolio investments (FPI) and a stable rupee.
Background: Earlier, the Forex reserves had scaled a record high of $426.028 billion in week to 13 April 2018. Since then it had been fluctuating and had even fallen by more than $35 billion, as monetary authority had been heavily intervening in market to salvage Indian rupee, which was worst performing currency in Asia throughout 2018.In previous reporting week (prior to June 21), reserves had declined by $ 1.358 billion to $422.2 billion.
India’s reserve position with International Monetary Fund (IMF) also rose by $9.6 million to $3.354 billion.
Reason: This rise in reserves was on account of increase in foreign currency asset, which is a major component of overall foreign exchange reserves of the country.
Foreign Currency Assets: expressed in terms of dollars includes effect of appreciation or depreciation of non-US units such as British pound, the Japanese yen and euro held in forex reserves. In reporting week of 21 June, foreign currency assets increased by $4.202 billion to $398.649 billion.
Gold Reserves: remained unchanged at $22.958 billion.
Special Drawing Rights (SDR): with IMF increased by $4.2 million to $1.453 billion. India’s reserve position with the fund also rose by $9.6 million to $3.354 billion..
Significance: According to market experts, with $427 billion, reserves can take care of imports for almost 10 months.
About Foreign Reserves
It is the reserve assets held by a central bank of country in foreign currencies which can act as a buffer and can help economy in challenging times. It can also be used to back liabilities on their own issued currency and to influence monetary policy of the country. Almost all countries across the world, regardless of size of their economy, hold significant forex reserves.
Importance: Forex reserves are one of the key revenue earning sources for a country central bank, which invests money in foreign government bonds and also with IMF and other secure investment class.
India’s FOREX Reserves includes components:
- Foreign currency assets (FCAs)- It constitutes largest component of Indian Forex Reserves and are expressed in US dollar terms.
- Gold Reserves
- Special Drawing Rights (SDRs)
- Reserve Tranche Position (RTP) of RBI with International Monetary Fund (IMF).
Higher forex reserves are must for a fast-growing economy such as India with higher imports and lower export earnings.
Tags: Foreign currency assets • Foreign Portfolio Investments • Foreign Reserves • FPI • Gold Reserves • IMF • India’s Forex Reserves • International Monetary Fund • RBI • Reserve Bank of India • Reserve Tranche Position • Special Drawing Rights
The World Gold Council its latest report highlights the quantum of gold holding by the different countries. The findings of the report are:
- India has the 11th largest gold reserve and the current holding pegged at 607 tonnes.
- India’s would have been at the tenth position had the list included only countries. International Monetary Fund (IMF) ranks third on the list with total gold reserves of 2,814 tonnes.
- The top spot is occupied by US gold reserves of 8,133.5 tonnes, followed by Germany with 3,369.7 tonnes.
- The third and fourth slot is occupied by Germany and France with reserves of around 2,400 tonnes each.
- China and Japan have more reserves of the precious metal when compared to India. Mainland China has gold reserves of 1,864.3 tonnes and Japan has gold reserves of 765.2 tonnes.
- The report notes that Gross purchases of 48 tonnes and gross sales of 13 tonnes led to an increase in global gold reserves by 35 tonnes on a net basis in January, with sizeable increases from nine central banks.
- This was the largest January increase in gold reserves since 2002 and illustrates the recent strength in gold accumulation.
The World Gold Council is the market development organisation for the gold industry and it aims to stimulate and sustain demand for gold, provide industry leadership, and be the global authority on the gold market. The members of the World Gold Council include gold mining companies.