Rising gold reserves aim at diversification: Sitharaman

Replying to a question during the Lok Sabha Question Hour by Congress MP Manish Tewari — who asked whether the shift from the US dollar toward gold signals a renewed search for an alternative international settlement mechanism — Sitharaman stated, “Gold is kept in the Reserve Bank and the RBI is actively buying gold. But beyond that, as regards any international currency or potential currency, there is not much for me to comment on at this stage.”

Tewari noted that since the US abandoned the gold standard in 1971, gold had lost its significance as a major financial asset. However, in recent years, central banks around the world have increased their gold holdings. In 2006, gold constituted only 6 per cent of global reserves; by 2024, it accounted for about 11 per cent. Countries like China, India, Poland and Turkey have emerged as some of the most aggressive buyers, coinciding with a surge in domestic gold prices in India.

When pressed further, Tewari asked whether this shift away from the dollar to gold indicates a search for an alternative international settlement mechanism that might reduce reliance on the dollar. In response, Sitharaman acknowledged that demand for gold in India remains strong and has even grown. She attributed this trend to the traditional preference of Indian households, small businesses and women for gold as a secure and liquid investment.

Regarding the Reserve Bank of India’s gold purchases, the Finance Minister confirmed that the central bank is accumulating gold to maintain a balanced reserve portfolio. While the US dollar continues to be a dominant component of India’s foreign exchange reserves, the RBI also holds assets in other currencies and gold.

Sitharaman emphasised that India’s increased gold accumulation is part of a broader strategy to diversify reserves rather than an indication of a shift away from the dollar or a move toward an alternative international settlement mechanism.