Rupee Hits Record Low: Did RBI Sell $12 Billion in Gold to Save India's Currency?

Key Takeaways

1. The Reserve Bank of India likely sold $12 billion worth of gold reserves in two weeks ending May 22 to buy foreign currency assets and defend the rupee, as per Bloomberg Economics.
    
2. The RBI has since officially denied the gold sale, which states its physical stock remains unchanged at 880.52 tonnes, and has called the reports incorrect. 

India’s Central Bank Likely Sold $12 Billion in Gold Reserves in Two Weeks to Prop Up the Rupee

The RBI appears to have offloaded a large chunk of its gold holdings to protect India’s foreign currency reserves. This comes amid rising pressure from the Iran war, the effective closure of the Strait of Hormuz, and sustained capital outflows driving up oil import costs. However, the RBI has officially clarified that no gold was sold and its physical holdings remain intact. 

Whether or not a sale occurred, the rupee remains under heavy pressure. India’s foreign exchange reserves fell sharply by $7.5 billion to $681.4 billion for the week ending May 22, 2026. The widening current account deficit and rising energy costs mean this pressure is unlikely to ease quickly. 

What Does This Mean for You and Your Savings?

Gold and silver prices in India have already climbed since the government raised import duties. However, initial price increases of 5 to 6% fell short of the 9% duty hike, as traders absorbed the shock using existing inventory. Once those stocks run out, consumers should expect sharper price rises.

Silver ETF investors face a separate risk. Import restrictions on silver may tighten supply. If demand rises sharply, ETF premiums above net asset value could spike, as noted by senior editor Mariya Paliwala of Juris Hour.

What Experts Are Saying and What Can Be Done?

Abhishek Gupta, senior India economist at Bloomberg Economics, said, “The purported sales underscore policymakers’ concerns about the pressure India is facing from sustained capital outflows and higher oil prices as the Iran war and effective closure of the Strait of Hormuz drag on.” He added that the RBI is prioritising liquid foreign currency reserves as the current account deficit weighs on the rupee.

Gupta noted that the RBI will look to rebuild its forex reserves when conditions allow. “Periods of dollar weakness, renewed foreign-capital inflows, or lower oil prices would create opportunities to add to foreign currency assets,” he wrote.

The government has pushed back firmly. The PIB Fact Check Unit stated that gold’s share in India’s forex reserves actually rose from 13.92% at the end of September 2025 to 16.85% as of May 22, 2026. The RBI’s Monthly Bulletin confirms physical stock is unchanged.

On the domestic front, one solution gaining traction is the monetisation of idle temple gold. The India Bullion and Jewellers Association has proposed using nearly 1,000 tonnes of gold held by religious trusts to ease import pressure. IBJA Gujarat State President Nainesh Pachchigar said, “Gold is the second-largest contributor to foreign exchange outflow from the country.” 

He clarified that the IBJA is not seeking a government takeover of temple gold, but a structured mechanism to keep it circulating within the formal economy.

Conclusion

India is navigating a rare pressure point where currency defence, energy costs, and gold policy are all colliding at once. The RBI is taking short-term steps, but a durable recovery for the rupee depends on global factors. These include the resolution of the Iran conflict, US Federal Reserve rate decisions, and the direction of oil prices. Domestic solutions like temple gold monetisation could offer some relief, but their scale and feasibility are still being assessed.

FAQs

What prompted the RBI to reportedly sell $12 billion in gold in just two weeks?

Bloomberg Economics indicates that the RBI possibly sold gold for purposes of bolstering its foreign currency reserves and providing support for the rupee’s falling value against the dollar, which reached an all-time low. The purpose of these initiatives was to offset the impact of rising oil prices and inflows of capital.

Was the RBI using US$ 7.5 billion of foreign currency assets to defend the rupee?

The statement says that during the same period, foreign currency assets of the RBI increased by about US$ 7.5 billion. This could provide added support to market pressures if they persist.