India's bold precious metals strategy is unfolding

Gold rose to a new record high of $2,790 an ounce on Thursday as investors appeared unfazed by data that could impact the Federal Reserve’s rate-cutting path this year. The precious metal’s rally comes amid revelations of significant, secret buying in London’s over-the-counter markets.

Strategic gold repatriation shows economic confidence

In a strategic operation that required extraordinary logistics – “Imagine the logistics again, we’re talking 102 tons of metal, a bit like transporting 20 adult elephants across thousands of miles” – India has successfully repatriated 102 tonnes of gold from London to domestic vaults. This latest transfer, announced during the auspicious festival of Danteras, marks the second major repatriation this year, following a similar 100-ton operation in May.

Historical context and strategic shift

The story of India’s gold holdings dates back to the financial crisis of the 1990s. Like the report explains, “When India faced a financial crisis, it was running out of dollars to import goods, so the then government of India decided to pledge its gold.”

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

Global market dynamics

Max Leighton, head of Commodities Research at Citi, provides insight into the market’s unexpected strength: “Gold and silver have risen despite a number of things going against them… we’ve had higher interest rates, stronger labor costs, Chinese demand In July and August, imports collapsed, yet they have continued to rise.”

The report indicates that “Unreported demand consistently eats up about a third of new gold mining production,” with central banks and wealthy investors identified as the likely undisclosed buyers.

Dominance of two metals: the silver story

While India’s gold moves are making headlines, its influence on the silver market is just as impressive. Vedant’s Anil Agarwal highlights this momentum: “Silver is shining in India… prices have crossed Rs 1 lak per kilogram, demand has doubled from last year. Demand for silver is driven not only by its traditional use but also by huge industrial demand .”

The industrial applications are particularly notable, as Agarwal explains: “It is now widely used in solar panels for renewable energy, in electric cars, in advanced healthcare, electronics and many other technologies. This combination of precious and functional is rare, and the gap between supply and demand is widening.”

The golden legacy of a nation

Perhaps most striking is the size of India’s private gold holdings. While central banks worldwide maintain impressive reserves – the US with 8,000 tonnes, Germany with more than 3,000 tonnes – Indian households collectively own an astonishing 27,000 tonnes of gold. This vast private holding underlines the deep-rooted cultural and economic significance of precious metals in Indian society.

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

“It’s not just about repatriating gold, it’s also about stocking up.” Sharma notes that he points to the RBI’s purchase of 32 tonnes of gold from April to September, which increased gold’s share of reserves from 8% to over 9%.

In today’s uncertain global landscape, India’s gold repatriation 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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