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Global Monetary Policy Might Compel RBI To Augment Its Gold Reserves

"There are concerns that this huge debt might lead to a reset of the dollar which would have major consequences for central banks holding reserves in dollar. Therefore, gold purchase by central banks is by way of diversification"

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However, even 29 years after that fateful incident, gold is still revered as a safe haven for the country's central bank. Pixabay

Rising trade protectionist measures along with threat of a currency shock and dovish global monetary policy might compel India’s central bank to augment its gold reserves.

Additionally, the need to have a diversified foreign currency and asset reserve will keep the Reserve Bank’s gold deposits glittering, opined economists and industry watchers.

The trend, they said, has led the country’s central bank to increase its gold reserves to 608.8 tonnes.

As per World Gold Council, India’s central bank holds the 11th largest gold reserves in the world as of May, in comparison, the US reserves are pegged at 8,133.50 tonnes, Germany (3,369.70), IMF (2,814), Italy (2,451.80), France (2,436) and Russia (2,168.3).

“Ongoing trade tensions and economic sluggishness remain the driving factors behind this continued diversification through gold,” said Alistair Hewitt, Director of Market Intelligence at the World Gold Council on the trend of gross purchases by four central banks.

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“Gold’s role as a safe haven asset and an effective portfolio diversifier makes it a good medium-term investment choice,” said Madhavi Arora, Economist, Edelweiss Securities’ FX and Rates desk. Pixabay

India’s forex reserves comprise Foreign Currency Assets (FCAs), gold reserves, Special Drawing Rights (SDRs) and India’s reserve position with the International Monetary Fund (IMF).

Latest data had shown an increase of $4.368 billion in overall reserve during the week ended April 26 to $418.515 billion.

According to Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities: “RBI is maintaining a share of 5-6 per cent of its total reserves in gold. As the reserves rose, RBI has increased the amount of gold it is holding, without increasing the share.”

The RBI’s weekly data had showed that the value of the country’s gold reserves was stagnant at $23.303 billion.

In the view of Tapan Patel, senior analyst, commodities, HDFC Securities, higher gold reserves guarantees asset diversification in terms of de-dollarisation to counter the volatile currency fluctuations amid strong foreign inflows.

“The global economic uncertainties pertaining to trade war, dovish US FED and lower interest rates has prompted India’s RBI to increase gold buying diverting to safer assets. However, we expect RBI will try to keep gold reserves steady around 6.50% of overall reserves kitty and maintain the ratio of foreign currency and gold reserves.”

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Additionally, the need to have a diversified foreign currency and asset reserve will keep the Reserve Bank’s gold deposits glittering, opined economists and industry watchers. Pixabay

Lately, concerns have been raised over the impact of US debt level of around $22 trillion on the greenback.

“There are concerns that this huge debt might lead to a reset of the dollar which would have major consequences for central banks holding reserves in dollar. Therefore, gold purchase by central banks is by way of diversification,” V.K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

On a nostalgic note, for gold’s value as the country’s ultimate saviour, Indians still remember the time when the government had to pledge India’s gold reserves with IMF in 1990-91

However, even 29 years after that fateful incident, gold is still revered as a safe haven for the country’s central bank.

Also Read: Do You Know How India Buried The Domestic Terror Time Capsule? Read Here To Find Out

“Gold’s role as a safe haven asset and an effective portfolio diversifier makes it a good medium-term investment choice,” said Madhavi Arora, Economist, Edelweiss Securities’ FX and Rates desk.

“Besides, gold’s ability to improve risk-adjusted returns and its use as valuable collateral are also factors that makes it relevant for central bankers to invest and diversify in gold.” (IANS)

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5 Less Known Activities You Can Actually Fund Through Bank Loan

Here are the lesser-known expenses that you can fund with the help of bank loans

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Bank Loan
There are 5 Less Known Activities You Can Actually Fund Through Bank Loan. Pixabay

Unplanned expenses can crop up anytime in your life. With a fixed amount of salary, sometimes you are left without savings for an unforeseen expense. However, with numerous loan options available from all sizes of banks, you can relax and take a deep breath. 

In today’s world, there is a variety of loan options offered by financial institutions, such as personal loan, car loan, education loan, house loan, and so much more. Given the factor that it is not always necessary that you need to go for a loan because you want to buy a car or a house. Here are the lesser-known expenses that you can fund with the help of bank loans: 

1 Planning a Family Vacation

It is said that the best travel experiences are unplanned. However, when you make random family vacation plans, you don’t always have enough money kept aside for it. Catering to such needs, there is an ample number of banks that offers personal loan for planning a family vacation. These loans provide a lower interest rate than that of any credit card. So, if you are planning to go for that trip that you have been preparing for so long, taking a loan from a bank is your best bet.

Bank Loan
However, with numerous options from Bank Loans, you can relax and take a deep breath. Pixabay
  1. Funding a Wedding

In India, weddings are considered a matter of pride. You love to go big and plan a spectacular big fat wedding. However, big celebrations often cost big money. The day to day expenses makes it impossible for you to stop and think about saving for your such expenses. So, what do you do when you go across your wedding budget? It’s simple; you can take out a loan to fund your wedding expenses. 

The best part of taking personal loans for a wedding is that you can repay the loan in inexpensive Equated Monthly Instalments (EMIs) over a flexible tenure of your choice. You can compare the EMI on an online EMI calculator to get a fair understanding of the ratio of principal interest to the interest due, based on the tenure and the interest rates.  

  1. Renovation of Home 

If you are a homeowner, the chances are that with time they’ll need repairs. Though, unfortunately, most of the upgrades come along with a hefty price tag. To ease this issue, you can go for a personal loan offered by reputed financial institutions like Axis Bank. First, make a list of the renovations that are required and the amount of money that you will need for the same. Then, with the help of an EMI calculator, you can evaluate the amount that needs to be paid through the EMI and let you make an informed decision about the loan. 

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However, mutual funds Investment with a Bank Loan can be risky as the returns are market linked. Pixabay
  1. Investing in Mutual Funds

You must have heard the financial lingo “invest a loan,” which means that you take a loan from the bank to invest in mutual funds. Taking a loan to invest in mutual funds can be fruitful in many parts like you can have a higher return on investment of the loan as opposed to a lower risk level of investment. However, mutual funds Investment with a loan can be risky as the returns are market linked. Therefore, you need to assess your risk tolerance and start by investing small amounts in different fund options. You can invest in SIP after calculating the monthly SIP amount using online SIP calculator and get good returns. When you keep such instances aside, investment is one of the lesser-known activity that can be funded by a bank loan.

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  1. Pay the Credit Card Bill

Indians have made the usage of credit card an essential part of their life. There are times when you need money to buy a gadget or a home appliance on an urgent basis. You might not have savings to match such emergencies and end up using your credit card. At the end of the month, you must clear your credit card bill, but you do not have enough in your account for the same. For such instances, you can take a personal loan to pay your credit card bills.