RBI Gold sprees Building reserves or moving out of the Dollar?

Reserve Bank of India (RBI) has been on an aggressive gold-sprees purchase spree, picking up huge lots of the metal in its coffers. Till January 31, 2025, the total gold reserve of India remained at 876.18 tonnes, valued at $70.89 billion.

This action has generated speculations regarding whether India is seeking to decrease dependence on the U.S. dollar in international trade.

But Finance Minister Nirmala Sitharaman has made it clear that these acquisitions are not aimed at substituting any international currency but are to maintain a balanced reserve portfolio.

Why Is RBI buying more Gold?

Gold has been a safe-haven asset of choice for many years, particularly in periods of economic and geopolitical instability. Current global volatility, combined with recent U.S. President Donald Trump's tariff announcements, has triggered demand for gold globally.

Central banks around the world, including India's Reserve Bank of India, have been building up bullion reserves as a currency risk hedge and against inflation.

The RBI bought 72.6 tonnes of gold in 2024 alone—four times the amount bought in the previous year. It was the largest annual buy since 2021 and the second-largest since the central bank began buying gold again in 2017.

This is in line with the worldwide trend among central banks to diversify their reserves away from the traditional currencies such as the U.S. dollar.

Impact on India's Forex reserves

India's foreign exchange reserves have risen to $630.6 billion, with gold making a major contribution to this growth. India's reserves alone had grown by more than $6.5 billion in the first two weeks of January, as the price of gold rose significantly.

Gold as a strategic asset

While discussions around de-dollarization have gained momentum, Sitharaman reassured that RBI’s gold accumulation is aimed at ensuring reserve stability rather than signaling a shift in monetary policy.

Gold provides a reliable cushion against global economic turbulence, making it a crucial component of India’s forex reserves.

As gold prices increased by 10% in 2025, this RBI move is a part of an overall push to strengthen India's financial strength in the face of changing global imbalances.