May 2, 2025

Since 2020, the RBI has added over 200 tonnes of gold to diversify forex reserves and reduce dependence on the U.S. dollar. Gold acts as a hedge against inflation, sanctions, and global crises, enhancing financial stability. However, it yields no interest, is volatile, and adds storage costs. Less dollar liquidity may weaken the rupee, raise import costs, and trigger inflation. Thus, gold should complement, not replace, liquid assets to ensure macroeconomic balance and protect India’s financial resilience.