(Kitco News) – One day after a bombshell report from Bloomberg claimed the Reserve Bank of India (RBI) sold gold reserves worth roughly $12 billion in the two weeks through May 22, the central bank issued a firm denial.
The RBI said in a statement on Wednesday that its physical stocks of the precious metal remain unchanged at 880.52 tonnes.
"The Reserve Bank of India (RBI) has come across reports in certain sections of the media about RBI’s sale of gold," the central bank said. “The RBI emphasizes that these reports are not correct.”
India's Press Information Bureau also called the media report "fake" in a post on X, and reiterated that the RBI’s bullion reserve remained unchanged.
On Tuesday, a Bloomberg Economics analysis based on publicly available data claimed that the RBI likely sold gold reserves worth roughly $12 billion in the two weeks through May 22, while buying $7.5 billion of foreign-currency assets.
The BE analysis from senior India economist Abhishek Gupta drew on publicly available data to infer that India’s central bank appears to have offloaded a substantial portion of its gold holdings to shield its foreign currency assets from the cascading fallout of the war in the Middle East.
The fall came despite the recent hike in import duties on the precious metal, which should have served to boost the value of the RBI’s holdings of bullion and dollars, suggesting the RBI was selling gold, Gupta said.
The $7.5 billion decline was largely due to a $4.5 billion fall in the value of the central bank's gold holdings, week-on-week. The value of the RBI's foreign currency assets also shrank by nearly $3 billion to $543 billion, the data showed.
The country's foreign exchange reserves fell to a more than one-year low of $681.4 billion in the week ended May 22, from $688.89 billion a week earlier, RBI data showed on May 29.
“The purported sales underscore policymakers’ concerns about the pressure India is facing from sustained capital outflows and higher oil prices as the Iran war and effective closure of the Strait of Hormuz drag on,” the Bloomberg report noted. “They also show the RBI is prioritizing reserves of liquid foreign currency as a wider current-account deficit weighs on the rupee.”
RBI governor Sanjay Malhotra is weighing all options available to stabilize the rupee, including an interest-rate hike and raising dollars from investors overseas, Bloomberg News reported earlier. “The RBI’s interventions in the foreign exchange markets have had some effect, helping the rupee outperform most peers in Asia since May 20, when the currency fell to an all-time low,” the report noted.
India is the world’s third-largest oil importer, and the nation is burning through foreign currency as the Iran war and the closure of the Strait of Hormuz drives up its energy costs and weakens the currency.
At the end of March, India’s central bank held 880.52 tonnes of gold, of which 77% was held domestically, with most of its overseas holdings stored at the Bank of England and the Bank for International Settlements, according to the RBI’s latest foreign exchange report from April.
Authorities are expected to unveil further measures to support the rupee as soon as this week.
This month’s sudden changes to import policies in the world’s second-largest gold and silver market have triggered a cascade of impacts across India’s metals and currency markets.
The Indian rupee hit a low of 96.923 per U.S. dollar on May 20 and spent several hours bumping up against the 97 level before regaining some of its losses over the following days.
