An analysis based on public data suggests that India's central bank may have sold a portion of its gold reserves to support its foreign exchange assets amidst ongoing Middle East conflict and heightened external shocks.

The analysis estimates that over the two weeks ending May 22nd, the Reserve Bank of India may have sold approximately $12 billion worth of gold while purchasing around $7.5 billion in foreign currency assets.

It is noted that although the Indian government has raised import duties on gold, which should theoretically increase the book value of the central bank's gold and dollar holdings, actual data shows a decline in the value of its gold reserves. This unusual movement is seen as an indicator of potential gold sales by the central bank.

The central bank did not immediately respond to media requests for comment on these assessments.

This potential action reflects policymakers' concerns about current economic pressures. With the Iran conflict persisting and the Strait of Hormuz largely closed, rising international oil prices combined with continuous capital outflows are placing India under dual pressure: accelerated depletion of foreign exchange and a widening current account deficit.

Analysis suggests the central bank is prioritizing the maintenance of more liquid foreign currency reserves to mitigate risks associated with a depreciating rupee. It was previously reported that the central bank governor is evaluating various measures to stabilize the currency, including interest rate hikes and attracting funds from overseas investors.

Since the rupee hit a record low on May 20th, the central bank's interventions in the foreign exchange market have had some effect, leading the rupee to outperform most other Asian currencies. On June 2nd, the rupee was trading at 95.17 per US dollar, down 0.2% for the day.

As the world's third-largest crude oil importer, India's ongoing consumption of foreign exchange reserves against a backdrop of rising energy prices is further intensifying pressure on its currency.

In response to these shocks, the Indian government has implemented several measures, including raising fuel prices and more than doubling import duties on precious metals, to curb capital outflows and cushion the economic impact. The market anticipates that authorities could announce further measures to stabilize the rupee as early as this week.

The analysis notes that the central bank may still look to increase its foreign exchange holdings when conditions permit. It states, "Opportunities to add to foreign exchange assets could arise when the dollar weakens, foreign capital inflows resume, or oil prices fall."

As of the end of March 2026, the Reserve Bank of India held 880.52 tonnes of gold in reserve, with 77% stored domestically; this proportion was 66% six months prior. In its semi-annual foreign exchange report released in April 2026, the central bank noted that its overseas gold is primarily held with the Bank of England and the Bank for International Settlements.

The pace of gold repatriation has accelerated notably in recent years. Analysts believe this trend indicates that central banks in emerging markets, including India, have grown significantly more concerned about the safety of overseas reserves following the West's freezing of Russian assets.