Economist: India's Central Bank May Have Sold $12 Billion in Gold Reserves to Replenish Foreign Exchange Assets
nashnova research
A Bloomberg economist estimates India's central bank sold roughly $12 billion in gold over two weeks while buying $7.5 billion in FX assets — a sign that gold reserves have shifted from a rainy-day stockpile to frontline ammunition in the rupee's defense.
Where did $12 billion in gold go?
Bloomberg senior India economist Abhishek Gupta reported on June 2 that the Reserve Bank of India (RBI) likely sold ~$12 billion in gold reserves in the two weeks ending May 22, while purchasing ~$7.5 billion in foreign-exchange assets.
The telling clue: India raised gold import duties during the same period, which should have lifted the book value of RBI's gold holdings — yet the value fell.
This means → book value should have risen but dropped. The only explanation is that RBI was actively selling gold.
Why tap the "last-resort" asset?
Since March, escalating Iran-related tensions pushed global oil prices up ~16%, foreign capital fled Indian equities, and the rupee hit an all-time low.
RBI was forced into massive dollar sales to defend the currency — for full-year FY2026, it net-sold $53.1 billion on the spot market, roughly $12 billion more than the prior year.
In plain terms = dollar ammunition was burning too fast; FX reserves alone could no longer keep up, so gold had to be converted into fresh firepower.
How far has the FX reserve "water level" dropped?
India's foreign-exchange reserves fell from a record $728.5 billion on February 27 to $688.9 billion on May 15 — nearly $40 billion evaporated in two and a half months.
Bankers estimate RBI spent roughly $12 billion in just the first week of March to stabilize the rupee.
This reflects a "war on multiple fronts": oil prices, capital outflows, and currency pressure all hit simultaneously, draining RBI's reserves far faster than normal.
How much gold is left in the war chest?
As of end-March, RBI held 880.52 tonnes of gold, with roughly 77% stored domestically.
If the $12 billion sale is confirmed, it would represent roughly 15% of total gold holdings at current prices.
This means → RBI still has room in the short term, but if the rupee stays under pressure and oil prices do not retreat, this last card will thin out fast.
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