Change in RBI governor effect on gold market in India – Evaluating the Effect of Rexit

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Reserve Bank of India (RBI) chief Raghuram Rajan announced publically that he would not be seeking a second term at the ending of his three-year tenure which ends in September. This created a steer for the Indian financial experts and common man alike. The Rexit (abbreviation of Rajan exit, humoured from the British referendum) has been the most highly discussed topic in social media. Bullion India evaluates Rajan’s exit and its impact on the gold market in India.

Raghuram Rajan was a former chief economist at the International Monetary Fund. After taking the reins of the RBI governorship he earned himself a rock star status for his achievements that include lowering runaway consumer prices and steadying the exchange rate.

The announcement of his exit came as a jolt to the corporate world and financial institutes including the gold market, stock markets, banks, and other financial services.

The sudden decision to leave of the one who many deemed as the world’s best central banker has created a global air of doubt towards the government’s commitment to organisational reforms. The position of India as a stable and safe investment zone over other emerging markets has also become uncertain. The political façade leading to the expert’s departure have shown the fractured side of Indian politics.

Rexit effect on gold market of India

The change in RBI governor effect on gold market in India might have a knee-jerk reaction due to the fall in the India Rupee. The rupee opened weaker at 67.65 per dollar, which is a one-month low as compared to the previous closing of 67.07. This is attributed to foreign funds pulling out. The resulting fall in share prices is bound to trigger a herd mentality and cause further, much larger, withdrawals from the Indian market.

Gold market rate shot up to Rs. 30,350 per 10 grams, it’s highest since May 10, 2014, at the bullion market. As gold’s demand safe haven, grows the increase in people buying gold for safety and long-term security saw a rise, amidst the uncertainty of who will succeed the rock star RBI governor, along with a fluctuating uncertain Sensex.

Many short-term investors found benefits in accumulated gold due to this sudden surge. A surge in the investment of gold bullion coins was observed by Bullion India.

The change in RBI governor:

Three names, who race to succeed the last act of Rajan, are economic affairs secretary, Shaktikanta Das, Reserve Bank of India (RBI) deputy governor, Urjit Patel and former Deputy Governors Subir Gokarn were named amongst a few others.

The effect of Rajan exit may be a short-lived, on the Indian commodity market however, Gold as always has served as a safe haven, bringing benefits and gains to its devotees.

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