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India’s bold precious metals strategy unfolds

Posted on by L. Dreeye
India’s bold precious metals strategy unfolds

Gold jumped to a new record high of $2,790 an ounce this Thursday as investors appeared unfazed by data that could impact the Federal Reserve’s rate cut trajectory this year. The rise in prices for the precious metal comes amid reports of significant, undisclosed buying in London’s over-the-counter markets.

Strategic Gold Repatriation Shows Economic Confidence

In a strategic operation requiring exceptional logistics… “Imagine the logistics again, we’re talking about 102 tons of metal, something like transporting 20 adult elephants thousands of kilometers.” – India successfully repatriated 102 metric tons of gold from London to domestic storage facilities. This latest transfer, announced during the landmark Dhanteras festival, marks the second major repatriation this year, following a similar 100-ton operation in May.

Historical context and strategic shift

The history of India’s gold reserves dates back to the financial crisis of the 1990s. As the report explains, “When India faced a financial crisis, it was running out of dollars to import goods, so the then Indian government decided to pawn its gold.”

Today’s landscape couldn’t be more different. “India’s foreign exchange reserves are now very healthy at $688 billion, enough to cover more than 11 months of imports,” the report noted. “The RBI is more confident that a repeat of the 1990s now looks virtually impossible.”

Global market dynamics

Max Layton, head of commodities research at Citi, provides insight into the market’s unexpected strength: “Gold and silver rose despite a number of factors going against them… we had higher interest rates, higher payrolls, demand from China. Imports fell in July and August, but they are nevertheless growing.”

The report states that “Unreported demand constantly eats up about a third of gold production from new deposits,” with central banks and wealthy investors identified as likely unnamed buyers.

The dominance of two metals: a silver story

While India’s gold movement is making headlines, its impact on the silver market is equally impressive. Anil Agarwal of Vedanta emphasizes this impulse: “Silver is shining in India… prices have crossed Rs 1 lakh per kg, demand has doubled compared to last year. The demand for silver is driven not only by its traditional uses, but also by huge industrial demand.”

Industrial applications deserve particular attention, as Agarwal explains: “It is now widely used in solar panels for renewable energy, electric vehicles, advanced healthcare, electronics and many other technologies. This combination of value and functionality is rare, and the gap between supply and demand is widening.”

The nation’s golden heritage

Perhaps most striking is the scale of India’s private gold reserves. While central banks around the world hold impressive reserves – 8,000 tons in the US, over 3,000 tons in Germany – Indian households collectively own an astounding 27,000 tonnes of gold. This huge private holding highlights the deeply rooted cultural and economic importance of precious metals in Indian society.

The RBI’s recent moves signal a broader shift in global gold dynamics. With 855 tons of gold in reserves and more than half of it now held domestically, India’s strategy reflects growing confidence in its economic strength and a prudent approach to geopolitical risks.

“We are talking not only about the repatriation of gold, but also about its reserves,” Sharma notes, pointing to the RBI’s purchase of 32 tonnes of gold from April to September, which increased the share of gold in reserves from 8% to more than 9%.

In today’s volatile global landscape, the repatriation of gold from India serves as both a symbol of economic resilience and a reminder of the enduring value of physical precious metal reserves in an increasingly digital world.

Source: SD Bullion

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