From Gold Ponzi Schemes to Adding 15 Tons of Physical Gold – India’s Reserve Bank Wants Gold

For the past several years we have reported on the various gold paper schemes that India has implemented in an attempt to steal, I mean assist the people of India in securing their gold. The citizens of India do not trust government and show their distrust by hoarding an estimated 20,000+ tons physical gold, have always been leery of government officials making offers to “help” them with their gold stacks. It has never worked nor will it ever work. This does not deter the government of India from following the Western influencers and roll out a “gold bond scheme” or some other type of nonsensical “scheme” to steal gold from the people.

We also reported several years ago that India and China had discussed India’s need for more gold at the reserve bank level. This information is now evading us, although I clearly remember reporting it. Anyway, the idea behind India acquiring more physical gold at the reserve bank level is simple – if you are going to continue to be a member of the BRICS alliance and the Belt and Road Initiative (BRI) you need to have gold on hand for trade settlement. India is now acting upon this request.

Let’s not forget that Russia and China opened the BRICS Gold Market for the specific purpose of assisting the other members of the BRICS alliance. India is considering opening a gold trading market for the purpose of setting a physical gold “price” because of the volume of physical gold that flows through the country. These are just two of the more recent developments in the gold market concerning India and the need for more gold at the reserve bank level.

India changed gears in 2018 and did something our of the ordinary and added a few tons of physical gold at the reserve bank level. This was the first time in well over ten years this had happened. India followed their 2018 acquisition with 15 tons of physical gold in 2019. Will this trend continue in 2020? Our guess is – they most certainly will.

Mumbai: The Reserve Bank of India stepped up hedging against currency volatility by purchasing 0.48 million troy ounce, close to 15 tonnes, of gold in October-November, central bank data showed. This is the highest bi-monthly gold purchase by the central bank since it started buying gold from the open market in December 2017.

India’s central bank bought 2.45 million troy ounces worth gold between November 2017 and November 2019, latest data indicates. India’s big gold purchase from IMF was the last in November 2009 when it bought 200 tonnes.

Safety of its forex asset is the prime reason that central banks park foreign exchange assets in the form of gold. “While safety and liquidity constitute the twin objectives of reserve management in India, return optimisation is kept in view within this framework,” the RBI said in its December report on management of foreign exchange reserves.

****

Ever since uncertainty over the dollar outlook mounted after the US-China trade war concerns in 2018, central banks across the globe started buying gold to diversify their foreign exchange reserves base. The RBI also started buying gold after a long gap. The surge in foreign inflow and low yield on overseas sovereign bonds may have led to RBI buy gold. India’s reserves rose by $64 billion in 2019. The central bank does not disclose its volume of gold purchase at the same frequency as foreign exchange reserves. Value of gold in reserves rose by $6.2 billion in 2019. Source

When the writing is on the wall most people act. India is now acting in it’s best interest to make certain they have a seat at the emerging global trade table. Verifiable physical gold, it seems, will be the currency of choice and not some fiat linen/cotton combination backed by guns and intimidation. India appears to be awakening to the new norm – are you? Got physical gold and silver?