RBI Adjusts Gold Holdings Amid Economic Pressures

The Reserve Bank of India has reportedly sold approximately $12 billion in gold to safeguard its foreign-exchange reserves amid economic pressures stemming from the ongoing conflict in the Middle East. This strategic move comes as the RBI also increased its foreign-currency assets. The analysis highlights growing concerns over India's external finances, driven by capital outflows and rising crude oil prices. As the rupee faces challenges, the RBI is exploring various options to stabilize the currency, including potential interest rate hikes and attracting foreign investments. The central bank's reserve composition has notably changed, with a significant portion of gold now stored domestically. Read on to discover more about the RBI's strategies and the implications for India's economy.

By Narendra Chaudhary Jun 2, 2026, 16:55 IST

RBI's Strategic Gold Sales

Recent analysis by Bloomberg Economics suggests that the Reserve Bank of India (RBI) may have discreetly reduced its gold reserves in response to the economic challenges posed by the ongoing Middle Eastern conflict. Abhishek Gupta, a Senior India Economist at Bloomberg Economics, estimates that the RBI sold around $12 billion worth of gold in the fortnight leading up to May 22. Concurrently, it is believed that the central bank increased its foreign-currency assets by approximately $7.5 billion during this timeframe.

This evaluation relies on publicly accessible reserve data and occurs despite a recent hike in gold import duties, which typically would bolster the value of the RBI's gold and dollar assets. The observed decrease in reserves indicates that the central bank has likely engaged in active gold sales, as suggested by Gupta.

The analysis highlights rising concerns among policymakers regarding the pressures on India's external finances. Factors such as ongoing capital outflows, escalating crude oil prices, and disruptions related to the Iran conflict, including the effective closure of the Strait of Hormuz, have intensified the strain on the country's balance of payments.

Simultaneously, a widening current-account deficit has negatively impacted the rupee, leading authorities to prioritize maintaining sufficient liquid foreign-currency reserves. In this context, foreign-currency assets offer more flexibility for currency market interventions compared to gold holdings.

Earlier reports indicated that RBI Governor Sanjay Malhotra is exploring various strategies to stabilize the rupee, including a potential interest rate hike and initiatives to attract more dollar inflows from international investors.

Rupee Faces Challenges Amid Rising Energy Prices

India's reliance on imported crude oil has rendered it particularly susceptible to the ongoing instability in the Middle East. As the third-largest oil importer globally, the nation has encountered an increasing foreign-currency burden due to higher energy prices inflating import costs.

The RBI's interventions in the foreign-exchange market seem to have provided some support, as the rupee has shown resilience since hitting a record low on May 20, outperforming several regional counterparts. Nevertheless, the currency remains under pressure, trading 0.2 percent lower at 95.17 against the US dollar on Tuesday.

In response to external vulnerabilities, the government has implemented measures such as raising fuel prices and significantly increasing import duties on precious metals. Further actions to bolster the rupee are anticipated in the near future.

Gupta anticipates that the RBI will likely resume accumulating foreign-currency reserves when market conditions improve. He noted that periods of dollar weakness, renewed foreign capital inflows, or declining oil prices could present opportunities to enhance foreign-currency assets.

The composition of the central bank's reserves has also seen significant changes. By the end of March, the RBI held 880.52 metric tons of gold, with 77 percent stored domestically. This is an increase from six months prior when only 66 percent of the gold reserves were held within India. According to the RBI's half-yearly foreign exchange report released in April, most of the remaining gold is stored with the Bank of England and the Bank for International Settlements.