Recent Global Crisis and the Demand for Gold by Central Banks: An Analytical Perspective

When India purchased 200 tonnes of gold under the International Monetary Fund's limited gold sales programme, it was interpreted inter alia that it may further inflate the gold price when the price was already ruling high. The general trend among the central banks’ demand for gold during recent global financial crisis is analysed. In that context, whether India’s purchase of gold was a reserve management strategy or otherwise and whether it affected the gold price trend is examined in this study. In the course of analysis, several related issues such as optimum size of gold in the foreign reserves and rationale of central banks buying gold with special reference to the global crisis are also addressed. [W P S (DEPR) : 14 / 2011]. URL:[http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/14WPS071011F.pdf].