IMF sells 200 tonnes of gold to RBI

Nations yellow metal holdings now 10th largest


The deal, which surprised traders who expected China to be the most likely buyer, will relieve the gold market of some uncertainty over how and when the International Monetary Fund would sell 403.3 tonnes of gold, about one-eighth of its total stock. The deal will increase India’s gold holdings to the tenth largest among central banks.
It also fuelled speculation that other governments – including Beijing – may be ready to diversify their reserves even at near-record gold prices, helping soak up IMF supply that the fund may otherwise be forced to sell on the open market.

“Central banks in India and China will be happy to accumulate gold at these levels. I will not be surprised to see even some southeast Asian banks buying gold,” Aaron Smith, Asia head of the $1.65 billion technical trading fund, Superfund, said.
“It’s potentially bullish from several points of view,” said Commerzbank analyst Eugen Weinberg.

“Gold was kept off the market and sold directly to central banks. So potential sales on market are limited by this.”

“Secondly, it showed large buyers are ready to accept the current price levels. Thirdly, central banks are increasing their gold reserves. The central bank gold agreement sales of 400 tonnes... is half empty already.”
The RBI said the purchase was an official sector off-market transaction and was executed during October 19-30 at market-based prices. 

An IMF official said the sale was concluded at an average price of about $1,045 an ounce, and that the transaction would be paid in hard currency and not in IMF special drawing rights.

* The deal will increase India’s gold holdings to 10th largest among central banks.
* It will lift India’s share of gold holdings from 4% to  6%, much less than most of the developed world but 4 times China’s share.
* India holds 357.8 tonnes of gold reserves
* Another reason behind the buying may be India’s push for a larger voting share in the IMF.
Retail gold
* No immediate impact on
retail gold prices.
* But psychological pressure may push down prices.

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