These days, it is being observed in the global market that the era of buying gold has returned because all the big countries are buying gold in huge quantity. It is necessary to make it clear at the out set that the purchase of gold by the central banks of all major countries does not mean increasing demand for gold in the domestic markets, but increasing the ratio of gold reserves against the dollar in their foreign exchange reserves. This global environment of buying gold, which has been in a sudden trend for some time, has given a lot of strength to the thought that the global dependence on the dollar will decrease rapidly in the coming times. And if that happens, it will be a huge blow to America’s global reputation over the past century. There has been a sudden increase in the purchase of gold in the global market in the last five-six months only. According to the available data , China has bought gold on a very large scale during this period. In the first three months of the year 2023 ( January to March), China has purchased about 58 metric tons resulting gold reserves in China is at its historic level today. In the month of March alone, China has purchased 18 tonnes of gold . On the other hand, despite the US imposing various economic sanctions on Russia as it is engaged in a war with Ukraine for more than a year, Russia also bought 32 metric tons of gold in the last quarter and today Russia has 2330 metric tons of gold. It is also very important to mention here that Russia is the second largest producer of gold in the world, despite this,it is constantly buying gold.
It is also surprising that in the last 2 months, the maximum gold purchase in the world has been done by Singapore at 51.4 metric tonnes.Turkey, on the other hand, bought 45.4 metric tonnes. Turkey is a member of the NATO group and has been surrounded by economic crises for a long time. It is also surprising that Kazakhstan, which is a producer of gold, and earlier its figures were related to the sale of gold, which is being now recorded in the purchase account . As a result of all this, today the global price of gold is around 2032 US dollars and it is at the highest price level since August 2020 when Corona was accepted as an epidemic by the whole world and all the countries were uncertain about their future and were giving priority to the buying of gold by giving importance to economic security and due to that the global value of gold increased a lot. It has also been seen that after the year 2010, gold reserve is at its highest level all over the world. The main reason behind the purchase of gold by the central banks of all the countries of the world around 2010 was the effect of the US recession of the year 2008-09 because there was great uncertainty globally towards the dollar and all the big countries were considering gold as an alternative due to the non-availability of dollars to pay for their imports. In the present context, the real reason behind the purchase is not yet clear, but it is definitely something else.
A report also makes it clear that all the major modern countries of the world keep a very large part of their foreign exchange reserves in gold. For example, the US has 68 per cent of its foreign exchange reserves, Germany has more than 66 per cent, Italy 63 per cent, France 59 per cent. But Russia is still at a level of 21 percent, though Russia has bought a lot of gold in the recent past. It is also surprising that these days China’s record in gold reserve is at a historic high, but despite this, it is only around 4 percent of its foreign exchange reserves. If we talk about our own country India, then these days the collection of foreign exchange reserves is equivalent to about 580 billion US dollars, of which the proportion of gold is 8 percent.India has not shown a sudden increase in the purchase of gold in the recent past, but for a long time, India has maintained the purchase of gold continuously. Yes, India’s procurement figures compared to other countries do not seem to be an immediate decision. According to a report, In the first quarter of the year 2020, India had 653 metric tonnes of gold reserve , which increased to 661 metric tonnes in the next quarter and reached 668 metric tonnes in the third quarter. After the passage of 3 years, till March 2023, India’s gold collection is equivalent to 787 metric tonnes. This makes it clear that on an average, India has bought 10 metric tonnes of gold per quarter.
Is buying gold globally an effort to reduce the value of dollar ? At the initial level, this can definitely be understood as one reason and another thought can also be that in this era of globalization, the time to come will be the mutual alliance of big countries. During that time, all the countries may also give gold a place of currency to meet each other’s needs. It is also a fact that due to American economic policies during the past, the dollar has been very aggressive at the global level and due to which the currency of almost all countries has become artificially weak globally. In the context of India too, in the last financial year, the dollar had gone to a historic high, due to which inflation in India’s domestic market was also at its highest level, which also affected a common man badly. On the other hand, the ban on the global purchase of Russia’s gold can also be one of the main reasons for the various economic sanctions imposed by the US against Russia in the war of Ukraine. Recently, there has also been a discussion that due to the interest rate policies of the US Federal Reserve, there has been a continuous decline in the stock markets of all major countries in the world, a decrease in the global level of their currencies, and the economic downturn in all countries is not far behind due to the high inflation rates in domestic markets. Perhaps due to this, the global reserves of dollars is continuosly decreasing .According to an IMF report published recently, the share of the US dollar in global currency reserve has come down from more than 70 percent in 1999 to 59 percent in the year 2022.
It is also a matter of great concern in the context of India that for the current financial year 2023-24, all the major economic institutions of the world including the World Bank, IMF, Asian Development Bank, etc. have estimated India’s economic growth rate at less than 6 percent. However, it has been proposed by the Government of India at the level of 6.4 percent and a very large part of the budget for the current financial year has been proposed for capital expenditure, which will be able to increase the rate of India’s economic growth. On the other hand, India has been maintaining the purchase of gold for a long time, but the level of india’s gold reserve is low compared to other big countries of the world. Although there is talk that Russia will try to give a new status to China’s currency Yuan at the global level at the meeting of BRICS countries to be held in August, but India will definitely not accept it. Today, India is the fifth largest economy in the world and in the coming time, it will be a matter of deep thought for it to increase the proportion of gold in the accumulation of foreign exchange reserves so that India can face any kind of economic uncertainties due to global diplomacy against the dollar.
Dr. P.S. Vohra , Academician, Financial Thinker & Newspaper Columnist , Views are personal
