A BLOOMBERG report (June 2) claimed that the Reserve Bank of India (RBI) sold about $12 billion worth of its gold reserves in two weeks through May 22. The Central bank denied the allegation the next day, stating clearly that its gold stock remained unchanged at 880.52 tonnes. Bloomberg retracted its report. As soon as Bloomberg made the allegation, an intense media war (most aggressively on social media) broke out, speculating about the actual state of the Indian economy. Many commentators argued that this showed the precarious situation of the rupee and India’s foreign exchange reserves.
The banking regulator, while denying that any gold was sold, carelessly attached a page from its May 2026 Bulletin, which had the April (not May) weekly gold stock data. This made social media users question the veracity of the RBI’s denial and accused it of spreading falsehoods. This imputation was plainly wrong as the monetary regulator would never make a false factual statement.
Many recalled 1991 when India had to sell and mortgage its gold to avert an imminent default on its debt-servicing obligations. While the immediate issue has been laid to rest, the wider question of Indians’ touchiness about the sale of RBI’s gold remains. How should the Reserve Bank deal with its gold reserves? Should it buy more or sell some when needed or just stay put?
As per the apex banking regulator’s data (it started publishing about the physical quantity of gold it held from 2020), at March-end 2026, it had 880.34 tonnes of gold; in March 2020, its gold reserves were 653.01 tonnes. Going further back, the RBI had 560.3 tonnes in March 2018 (IMF data). The financial regulator began buying gold from the market in 2018-19 (as decided by an RBI committee, of which I was its member as Secretary, Economic Affairs). The idea was that the RBI should buy small quantities of gold, especially in situations when there was excessive inflow of foreign exchange, which would also help prevent the rupee from unwanted strengthening.
The purchases increased the gold reserves to 693.45 tonnes in March 2021. The financial system regulator bought a good quantity of gold the next year, taking its gold reserves to 760.43 tonnes in March 2022. After slowing down purchases in 2022-23 ( 794.63 tonnes) and in 2023-24 (822.09 tonnes), the RBI bought a large quantity of gold again in 2024-25, taking its reserves to 879.58 tonnes. In 2025-26, there was hardly any purchase and the gold reserves increased by just 0.76 tonnes. The RBI bought 0.18 tonnes of gold in April 2026, which is where its current stock stands.
In eight years, the Central bank bought a total of 320 tonnes of gold. While India moved to the eighth position globally, the RBI’s gold reserves are about 10% of those of the US (8,133 tonnes). China held 2313.5 tonnes in the first quarter of 2026.
A standout feature of India’s gold reserves accumulation strategy is that the apex monetary regulator uses foreign currency reserves (US dollars, euros, etc.) to buy gold. India does not have any current account surplus as its imports exceed exports. India’s reserves are primarily built from capital account surpluses (largely from volatile foreign portfolio investment and foreign debt).
The rising price of gold has also brought in another important change in the role of gold reserves. As gold prices have been rising for the last two years, the dollar value of the RBI’s gold reserves has gone up sharply. At the end of March 2018, the apex body’s gold reserves equalled $21.615 billion. In March 2026, these were valued at $120.742 billion.
While the physical gold quantity increased by 57%, the dollar value increased by 460%. In rupee terms, the gold value rose still higher. In the Central bank’s balance sheet, it was placed at Rs 1.44 trillion on June 30, 2018 and Rs 10.94 trillion on March 31, 2026, generating a massive growth of 660%. The financial regulator revalues its gold on a daily basis at 90% of the London Bullion Market Association (LBMA) price in US dollar and at the prevailing rupee-US dollar market exchange rate.
The Bloomberg report touched a raw nerve — of Indians viewing any gold sales by the regulatory body as tantamount to India’s economic house being on fire. Why are we so touchy? If the RBI can buy gold from the market (as much as 320 tonnes in the last eight years), why should it not sell when advisable? Why did the alleged sale of 12 tonnes alarm so many people?
The alacrity with which the Central bank had to clarify and assure that all the gold was intact betrayed its underlying nervousness about selling gold.
Can we stop being overly sentimental about selling gold? Gold is a reserve financial asset for the apex monetary regulator, like other assets which it holds, primarily foreign exchange reserves. If foreign currency reserves can be used/sold, what is so special about gold that it must not be sold?
The RBI today sits on the horns of this golden trilemma: should it buy more gold to catch up with the US and China? Should it sell some gold to close the dollar demand-supply gap when needed? Or, should it stay still — neither buy nor sell gold?
Currently, there is a major gap — the dollar demand exceeds its supply. The Central bank can easily clear this gap by using its forex reserves, including gold. Its inability or unwillingness to use gold (it makes up about 20% of the forex currency reserves) is forcing the government and the RBI to undertake other desperate measures to shore up the dollar supply. On June 5, the financial regulator introduced extraordinary (and imprudent) measures like bearing the partial hedging cost of the PSUs’ borrowings and the full cost for banks’ FCNR (B) deposits, inducing them to raise foreign borrowings and deposits.
The Central banking authority and the government should consider the option of selling some gold dispassionately. It will require changing its own and the people’s mindset that gold is like any other foreign exchange asset and there is no odium attached to gold sales, when required. The notion that selling gold amounts to economic desperation or signifies that the economy is in trouble is wrong and needs to be laid to rest. Currently, international gold prices are quite high and the RBI is sitting on considerable gains as it bought its gold in the last eight years at far lower prices. It makes sense to book some profit and shore up usable foreign currency reserves.
Buying gold currently makes no sense. The option of staying put is symptomatic of a fear psychosis. Sell some gold without fear.
