Gold now = 12% of India’s forex assets, up from 8.3% last year.
India’s gold reserves just hit a record high — 879.6 tonnes as of March 2025! That’s a 33% jump from mid-2020 levels.
RBI stacking gold makes a lot of sense right now:
This diversifies concentration from Dollar.
It’s a timeless hedge against inflation, especially if the currency weakens.
Its worldwide standard and accepted.
Offers a buffer during sanctions or global financial instability
All big banks are doing same not just us.
In a world of rising geopolitical risks and unstable fiat currencies, this move makes more sense and also is a strategic preparedness.
So as some OG’s say follow the steps of smart people, should we also allocate more to gold to be cautious probably around 15% of our allocations? or SIP is ok with same allocation towards gold?
This is a very misleading statistic being thrown around. Gold reserves at all time high but Gold reserves as a % of GDP is actually down. If the economy grows, you expect Gold reserves to grow inline with that which isn’t happening.
@Kiyoto_Kai IIUC, what you are pointing out is that
while India might be increasing its gold reserves as a hedge against global uncertainty,
the increase in gold reserves is not yet inline with (i.e. sufficient to cover) the recent growth in India’s economy? Did i understand that right?
Am unable to find online a reliable source for this trend.
Could you share the source for this that you are referring to?
Am curious to see how other major economies are performing on this metric over time.
What is the reasoning behind this expectation? Can you elaborate a bit?
Here’s a train of thought that justifies the opposite expectation -
As an economy grows, the economy’s ability to hold larger gold reserves increases? Yes. However, does the economy actually hold larger gold reserves? Not necessarily. Since, by holding gold, it loses the opportunity to deploy the newly acquired wealth to further increase/accelerate growth / GDP / economic output.
Among the top 50 countries with significant gold reserves in the world,
calculating the metric Gold-reserves as a % of GDP based on
Note: Price of gold assumed to be $108M / metric-ton. Quick math, based on estimates. Please cross-check.
India currently ranks 34th in this metric at ~2.27%.
The current world average of this metric is ~3.4%.
If we were to look at the top 20 (List A) vs. the bottom 20 (List B) countries in this list,
List A (top20 of 50) is a varied group of nations that are largely reacting to the current global trends.
List B (bottom20 of 50) is comprised of the nations that drive the global economic system. They are the largest, most diversified, and most influential economies that are currently shaping the overall direction of the world economy (crisis?) in 2025.
(of course, exceptions exist in both these lists)
Considering the above,
not sure whether pursuing a significantly higher “Gold reserves as a % of GDP” metric is something India (or any other economy) should aspire to. Thoughts?
Good questions — let me explain what I meant. As an economy grows, its exposure to external shocks increases proportionally. The currency base expands, trade volumes grow, and the stakes in global capital markets rise. Gold, while not a yield-generating asset, serves as a hedge precisely for those moments when everything else breaks — currency collapses, geopolitical disruptions, sanctions, or global liquidity freezes. So if GDP rises but gold reserves don’t, the system’s insurance coverage is effectively getting thinner. It’s not just about asset allocation, but about systemic preparedness. An economy that’s doubled in size but holds the same amount of strategic reserve is underprotected relative to its new scale.
That said, the broader focus shouldn’t just be gold reserves — it should be total forex reserves as a percentage of GDP. But even that hasn’t kept pace with India’s economic growth. At some point, we have to ask what the role of forex reserves really is if they’re not scaling with the economy’s increasing size and complexity. The picture gets more concerning when you realize that many of the countries with similar or lower reserve-to-GDP ratios are developed economies with open capital accounts and global reserve currencies. India doesn’t have that luxury — it has a managed float, a closed capital account, and higher vulnerability to sudden stops. That makes the case stronger, not weaker, for reserves — gold or otherwise — to grow in line with GDP.
