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India Brings Gold Reserves Back Home

Published by honor in category Market News on 10.06.2024
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One of the most notable trends in the gold market over the past three years has been the repatriation of gold reserves by central banks. Repatriation refers to the process of transferring gold stored in foreign vaults, such as those in London, back to domestic vaults.

Read more on the topic here: Central banks had record breaking gold purchases last year

According to the Times of India, as of May 31, 2024, the Reserve Bank of India had repatriated 100 tons of gold from its London vaults. India is currently the eighth largest holder of gold reserves, with 822.1 tonnes of gold by the end of the first quarter of this year.

As of the end of 2023, 413.8 tons of India’s total gold reserves were held abroad according to the World Gold Council. This means that nearly a quarter of the gold holdings have been brought back into the country. Let’s explore the reasons behind this decision and its potential consequences.

Why are gold reserves held overseas?

There are several reasons why central banks, particularly those from developing economies, choose to hold gold reserves overseas. Firstly, it is due to the security of the reserves. The saying “don’t keep all your eggs in one basket” is relevant here; in this context, it translates to “don’t keep all your reserves in one vault.”

Another reason is the ease of trading. It’s much simpler to maintain a few well-secured reserves and trade their ownership rather than physically moving a large amount of gold for each transaction in the long term.

Cost efficiency is also a factor. Using established, highly secure vaults reduces costs since the expense is distributed across the total value of the stored assets.

Lastly, geopolitics plays a role in why reserves are held overseas by financial institutions. Storing reserves in another country’s vaults signifies trust in the host country’s stability and reliability in the financial system

Why does India have gold reserves abroad?

However, in India’s case, not all these criteria were the reasons for holding gold reserves in London. Instead, the gold ended up there due to a series of unfortunate events.

In 1991, the Indian rupee experienced a severe depreciation, losing nearly 43% of its value against the United States dollar in that year alone. This pressure was a result of the Reserve Bank of India’s deliberate devaluation due to low export levels.

At that time, India was a net importer, with Indian export prices being too high to compete with Chinese exports. Consequently, on July 1, 1991, the RBI decided to devalue the rupee from 21.2 rupees per dollar to 23 rupees per dollar. However, a domino effect followed, and by July 3, 1991, the exchange rate had fallen further to over 26 rupees per dollar.

To address the crisis, the Reserve Bank of India borrowed $405 million from the Bank of England and the Bank of Japan

The plan was to use these funds to purchase Indian rupees from foreign exchange markets, thereby mitigating the surplus caused by the devaluation shock.

However, this loan required collateral. As a result, 46.91 tons of gold were transported to the Bank of England’s vaults. Although the loan was repaid by the end of 1991, the RBI chose to keep the gold reserves in London.

Why is India repatriating its gold reserves?

As mentioned, the repatriation of gold reserves can significantly impact geopolitical relations between countries. While the Reserve Bank of India cited rising storage costs due to the increasing price of gold as the reason for repatriating 100 tons of gold, this cannot be the sole explanation.

The trend of central banks repatriating gold reserves has intensified since the outbreak of the war in Ukraine

Witnessing the numerous sanctions imposed on Russian-held assets abroad, central banks worldwide have decided it would be wiser to return their gold reserves to their national vaults.

Another example is the seizure of Venezuela’s gold reserves by the Bank of England. The UK does not recognize Nicolás Maduro, who exerts political influence over the Central Bank of Venezuela, as the legitimate president. Consequently, on June 30, 2023, 31 tons of gold reserves, valued at nearly $2.5 billion today, were confiscated.


Over the past two years, the growing influence of Eastern countries on the global gold market has become increasingly evident. While the West often regards gold as a “relic of the past,” the East is investing more and more in this precious metal, especially as a safe haven asset.

This trend is visible across various markets. In Asia, the demand for physical gold bars and coins in the spot market is on the rise.

Conversely, in Europe, annual demand for physical gold products fell by 53% in the first quarter of this year

Additionally, examining the capital movements in gold exchange-traded funds (ETFs), Europe has experienced a steady outflow from these funds for the past 13 consecutive months, indicating that gold is being sold. In contrast, there is an inflow of capital into these funds in Asia, signifying increased investment.

In light of these developments, the trend is clear: gold is leaving the West and heading East.


The decision by the Reserve Bank of India to repatriate its gold reserves reflects a broader trend in the global gold market. Central banks, particularly in the East, are increasingly moving their gold reserves back home, driven by geopolitical considerations, rising storage costs, and a desire for greater control over their assets.

India’s move is part of a larger shift where the East is asserting greater influence in the gold market, while the West appears to be divesting. This trend has been accelerated by recent geopolitical events, such as the war in Ukraine and sanctions on Russia, prompting many central banks to reassess the location of their gold reserves.

The growing demand for physical gold in Asia, contrasted with the declining demand and steady outflows from gold ETFs in Europe, underscores this shift. As gold moves from the West to the East, it signals changing economic dynamics and the strategic importance that Eastern countries place on this precious metal.

In summary, the repatriation of gold by the Reserve Bank of India is a strategic move that aligns with a global trend, highlighting the evolving landscape of the gold market and the shifting economic power towards the East.

Gold price (XAU-GBP)
1,839.93 GBP/oz
+ GBP4.08
Silver price (XAG-GBP)
23.38 GBP/oz
+ GBP0.03

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