Gold on a hot run, central banks and RBI go slow on buys as geopolitics also weighs

Mumbai: Central banks have slowed their gold purchasing, reflecting a cautious approach as they navigate geopolitical uncertainties and elevated bullion prices. However, the long-term trend of diversifying reserves away from US assets remains intact, according to experts. "Global central banks bought net 10 tonnes in July based on reported data, a moderate net allocation compared to previous months. Despite this slower pace of net buying, central banks continue to be net buyers of gold even in the current price range," the World Gold Council said.

The number for July 2025 is 70% lower year-on-year. For the first half (H1) of 2025, central banks bought 123 tonnes compared with 130 tonnes in the same period a year ago.

"If geopolitical issues turn favourable, prices could decline, which would be a more opportune time to increase gold stock. The Reserve Bank of India (RBI) also follows a similar pattern, apparently. It has increased gold holdings to 12.1%. Now, it would await cues from geopolitical developments," said Madhavankutty G, chief economist at Canara Bank.

Soaring prices of the yellow metal, which hit a record high last week, is also cited as a reason for the slowdown. Though central banks are strategic buyers of gold, they are not completely insensitive to its price level. Spot prices of gold in the international market are near $3,600 an ounce.

Madhavankutty said that if the trade war between India and US abates, gold prices might soften, which would give more headroom to purchase gold.

"Also, if USD weakens further, it is again favourable as prices would weaken. So, the pause in July is more a risk management move rather than aimed at reducing the gold stock," he said.

The RBI did not add to its gold reserves in July, following a modest addition of 0.4 tonnes in June. Between January and July, it increased its gold reserves by 4 tonnes, a sharp contrast to the 40 tonnes bought during the same period in 2024, according to Kavita Chacko, research -head India at WGC. "Despite the slowdown, RBI's gold holdings remain at a record high of 880 tonnes," she said in a note dated August 20.