KUWAIT CITY, Jun 4: A recent Bloomberg Economics analysis has triggered a political and financial controversy after suggesting that the Reserve Bank of India (RBI) may have sold large quantities of gold in the weeks leading up to May 22, a claim strongly denied by both the central bank and the Indian government.
Bloomberg’s Analysis: Gold Movement Raises Questions
According to Bloomberg Economics, the RBI is estimated to have sold around $12 billion worth of gold over two weeks ending May 22, while simultaneously purchasing approximately $7.5 billion in foreign currency assets.
The analysis, authored by Abhishek Gupta, Senior India Economist at Bloomberg Economics, noted that the reported decline in the value of India’s bullion reserves occurred despite higher import duties on gold, which typically would not imply a fall in holdings.
Gupta suggested that the pattern could indicate active gold sales by the central bank, potentially aimed at preserving more liquid foreign currency reserves at a time of heightened external pressures.
Possible Policy Motivation: Defending the Rupee
The report linked the alleged move to growing macroeconomic stress factors, including:
- Rising global crude oil prices
- Increased capital outflows
- Geopolitical tensions in the Middle East
- Pressure on India’s current account deficit
Bloomberg Economics argued that under such conditions, central banks often prioritize liquid foreign currency assets over gold to maintain flexibility in stabilizing domestic currencies.
India, being the world’s third-largest oil importer, is particularly sensitive to oil price shocks, which can rapidly widen its import bill and strain foreign exchange reserves.
Market Pressure on the Rupee
The report also noted that the Indian rupee remained under pressure, with traders citing rising crude oil prices and renewed geopolitical tensions as key drivers.
Reuters, quoting market participants, reported that:
- The central bank likely intervened in the foreign exchange market to limit rupee depreciation
- The rupee was trading around 95.47 per US dollar, down 0.2% on the day
- State-run banks were seen offering dollars near the 95.50 level
- Brent crude rose close to $97 per barrel, marking a multi-day upward trend
These developments coincided with renewed tensions in the Middle East, which further increased volatility in global energy and currency markets.
Political Reaction: “Is the Country Bankrupt?”
The Bloomberg report quickly became politically sensitive after Arvind Kejriwal, former Delhi Chief Minister, questioned its implications in a post on X (formerly Twitter).
He wrote:
“Is this news true? Is the country’s gold being sold? Has the government become so bankrupt? … Why doesn’t the government tell us anything? What is the state of the country?”
His remarks amplified public debate over whether India’s economic management strategy was under strain or being misinterpreted.
Government and RBI Strongly Reject Claims
Both the Reserve Bank of India and the Indian government firmly rejected the Bloomberg interpretation.
The RBI issued a clarification stating:
- Reports claiming gold sales were “incorrect”
- The physical stock of gold remains unchanged
- Gold holdings are regularly disclosed in the RBI’s Monthly Bulletin
- Public should rely only on official RBI data
According to the central bank, India’s gold holdings stood at approximately 880.52 metric tonnes, with no evidence of any physical sale.
The government’s fact-checking arm under the Press Information Bureau (PIB) also dismissed the claim, calling it misleading. It argued that official data showed the share of gold in India’s foreign exchange reserves had actually increased, not declined.
PIB data cited:
- 13.92% (end-September 2025)
- 16.70% (March 31, 2026)
- 16.85% (May 22, 2026)
This, according to PIB, contradicts any suggestion of large-scale gold liquidation.
Alternative Explanation: Market Value, Not Sales
Economists and treasury officials offered a different interpretation, stating that the apparent decline in bullion value was likely due to global gold price fluctuations, not actual selling by the RBI.
They argued that:
- Falling international gold prices can reduce the valuation of reserves
- No corresponding evidence of physical outflows exists
- Reserve composition data does not indicate liquidation
Broader Context: Currency Defense Strategy
While denying gold sales, analysts acknowledged that the RBI may still be actively managing currency volatility through interventions in the foreign exchange market.
Such interventions typically involve:
- Selling or buying foreign currency assets
- Smoothing short-term volatility in the rupee
- Maintaining stability amid external shocks such as oil price spikes or geopolitical tensions
The controversy highlights the sensitivity surrounding India’s foreign exchange management at a time of global uncertainty. While Bloomberg Economics suggested possible gold sales to bolster liquidity, both the RBI and the government maintain that no gold has been sold, and that fluctuations in valuation—not liquidation—explain the changes in reported figures.
The debate underscores the broader tension between market interpretation and official data during periods of currency pressure and geopolitical instability.
by John C Fernandes
Online Media Manager
Arab Times
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