Your grandparents and parents may have often told you to buy gold to tide over any financial crisis - but central banks around the world are doing exactly that. India ranks among the top 10 countries with the highest gold reserves, and its holdings have been growing. The Reserve Bank of India (RBI) is also choosing to store most of the country's gold reserves domestically, bringing back several tonnes from abroad.
Between October 2025 and March 2026, RBI repatriated 104.2 metric tonnes of gold. Previously, from 2023 to 2025, the central bank had brought home around 280 tonnes, including 64 tonnes in mid-2025 and approximately 100 tonnes from the UK.
In a world that has faced multiple economic shocks from the pandemic, the Russia-Ukraine war, and Donald Trump's tariffs, economies have become more vigilant about their external buffers. Foreign exchange reserves act as an important cushion that defines an economy's ability to repay its debts. Gold has always been a part of foreign exchange reserves, but its importance is changing rapidly.
Central Banks' Gold Buying Spree
Central banks around the world have been buying gold, and the trend is likely to continue despite rising prices. According to the latest World Gold Council report, central bank buying is expected to remain solid at levels close to those in 2025. Initial estimates of net buying in the first quarter are reassuringly robust, particularly in light of recent price volatility and notable mobilisation of reserves.
Why Are Central Banks Buying Gold?
As an Assocham report notes, central banks hold gold as part of their official foreign exchange reserves, making them among the world's largest buyers and holders. Their decisions play a pivotal role in shaping gold prices and influencing market sentiment. The primary reason is to diversify reserves and safeguard value over long periods. Unlike fiat money, gold's value is not tied to any single country's economic performance.
Multiple factors favour gold: it is a safe haven in times of uncertainty, a diversifier that keeps the basket balanced, and in recent years, a hedge against de-dollarisation. Experts note that central banks have stepped up buying as countries reduce excessive dependence on the US dollar. Another driver is the fear of sanctions amid geopolitical tensions.
The de-dollarisation trend has accelerated since the Russia-Ukraine conflict and increasing trade and tariff uncertainty, prompting major economies and emerging markets like China and India to stock up on gold as part of forex reserves. Gold's neutrality - not linked to any single country's monetary system - makes it a reliable long-term store of value.
In 2024, India ranked among the top buyers, adding 72.60 tonnes to its reserves, second only to Poland (89.54 tonnes). China has also consistently ranked among the top five buyers in recent years.
The share of gold in India's forex reserves has jumped significantly. In FY 2020-21, gold made up just 5.9% of reserves; by 2025-26, it contributes 16.7%, partly due to rising gold prices but largely due to increased holdings. In value terms, the share rose from 13.92% at end-September 2025 to about 16.70% at end-March 2026.
Why Is RBI Repatriating Gold?
The central bank has not only increased gold holdings but is also bringing physical gold back from overseas facilities to store domestically. At end-March 2026, RBI held 880.52 metric tonnes of gold, of which 680.05 tonnes were held domestically, while 197.67 tonnes were with the Bank of England and the Bank for International Settlements, and 2.80 tonnes in gold deposits. In March 2023, only 38% of India's gold reserves were held domestically; this has increased to about 77% by March 2026.
Storing gold domestically offers advantages in cost and security. Experts note that it reduces vulnerability to external ad-hocism and saves on costs associated with holding reserves abroad. Benefits include greater financial sovereignty, risk diversification, and economic security as a hedge against crises. Repatriation also mitigates geopolitical risks like asset freezes, as seen with Russia sanctions, reduces storage costs, and enhances sovereign control.
Madan Sabnavis, Chief Economist at Bank of Baroda, explains: "A central bank would like to repatriate gold assets once it has the structures to house them within the country. The benefits are easy access to these reserves whenever required and avoiding counterparty risk when lodged in another country."
The move also signals strength to investors. "Bringing back gold is a strong messaging system to inform investors that the country and economy are strong and mature. This reduces costs for the central bank, as storing in the UK involves vault costs and regular audits," Sabnavis adds. "It also shows less dependence on other countries like the US and UK, which are major vaulting centres. Centres like Singapore and Dubai have emerged for such facilities given the strength of bullion trading markets."
Sachchidanand Shukla, Group Chief Economist at Larsen & Toubro, says: "Repatriation helps in better reserve management. It enables direct custody and flexibility in volatile markets, strengthening financial stability against shocks. It boosts investor confidence by signaling proactive risk management and economic self-reliance."
To him, this shift signals broader erosion of trust in offshore assets, promoting gold's role in a multipolar monetary system. Gold repatriation implicitly reflects de-dollarization trends and geopolitical fragmentation, as central banks hedge against sanctions and dollar dominance post-Russia events.
There is also a currency factor: gold held domestically strengthens a country's currency, as large reserves including gold back it. DK Srivastava, Chief Policy Advisor at EY India, notes this trend among BRICS countries, where major members have increased gold reserves by buying from international markets and repatriating from western countries. "If and when a BRICS currency is launched, holding larger gold reserves would provide a good initial position for India. Investor confidence is positively affected when it is known that a country is not vulnerable to external ad-hoc interventions. There is a tangible restructuring of the international monetary and financial system as the world moves from unilateral to multilateral structure," he says.
Srivastava believes India should keep all its gold reserves domestically. "Strategically, it makes no sense for a large country like India to keep gold reserves outside. We were forced in the early 1990s to shift some gold abroad for an IMF loan. However, it is best to bring all gold reserves back to India," he tells TOI. He calls it a strategic risk to keep gold outside, especially given ad-hoc initiatives by major western countries to freeze financial and reserve assets if policies are not aligned with their interests.
RBI is not alone in repatriating gold. Central banks like France's Banque de France, Germany's Deutsche Bundesbank, and Serbia's National Bank have done the same. Repatriation aims to bolster sovereignty and eliminate foreign custody risks.
In times of emerging geopolitical uncertainties, where countries take unilateral calls to economically cripple others, India is looking to secure its foreign exchange reserves buffer and reduce dependency in a multi-polar world - bringing back its gold is just one step in that direction.
