Decline in the Value of Gold Reserve of RBI

The value of gold reserves with the Reserve Bank of India (RBI) has dropped 29% after international gold prices crashed last week following speculation that Cyprus may sell its gold reserves to rein in its ballooning fiscal deficit. The value of RBI’s gold reserves (557.75 tonnes) declined from $34.08 billion in September 2011, to $24.17 billion early this week.

 Apart from gold, RBI’s foreign exchange reserves include foreign currency assets, special drawing rights, and reserves held with IMF. Foreign currency assets consist of sovereign bonds, mainly US treasury bills. Buying more gold will help the Indian central bank diversify its assets.

Gold as a percentage of RBI’s total reserves has been declining since the mid-1990s. In 1991, the Indian central bank had to pledge 67 tonnes of gold to Union Bank of Switzerland and the Bank of England to raise $605 million to shore up its dwindling forex reserves, when the country faced its worst ever balance of payments crisis. India’s forex reserves had declined to a mere $1.2 billion in January 1991. Currently, India’s forex reserves are at $293 billion.It constituted 20% of the reserves in 1994, but dropped to 2.98% by end-September 2008. RBI then bought 200 tonnes of gold from the International Monetary Fund (IMF) in November 2009, following which the share of the metal in the total reserves raised above 8%.

Losers in the Indian market through this decline in gold price in April 2013?

Most investors who lost include Small retail investors, Proprietary traders & HNIs.

  Gainers in the Indian market through this decline in gold price in April 2013?

Arbitrageurs who purchased April & sold June contract on MCX and those who bought gold on Comex and sold on MCX.