GLOBAL CRISIS AND THE DEMAND FOR GOLD BY CENTRAL BANKS: A REVIEW ESSAY WITH REFERENCE TO INDIA

Abstract

When India purchased 200 tons of gold in October 2009, it was perceived, inter alia that it may spur the demand for gold by many central banks and the price may further escalate. This paper examines the general trend among the central banks' demand for gold in the wake of the recent global financial crisis. In that context, the paper focuses on whether India's purchase of gold was an appropriate reserve management strategy and if it affected the gold price trends. Related issues such as optimum size of gold in foreign reserves and the rationale of central banks buying gold with special reference to the global crisis are also addressed.