Gold on record breaking spree, sets new peak at $1094

Gold on record breaking spree, sets new peak at $1094

The metal which had been on a rising spree since last few sessions gathered momentum after the Reserve Bank purchased 200 metric tonnes of gold from the International Monetary Fund, raising fears that more governments might follow suit.

The precious metal also strengthened in trading in London and New York on a weaker dollar that boosted the metal’s appeal as an alternative investment.

The gold for spot trading climbed as much as $8.70, or 0.8 per cent to 1,094.40 dollar an ounce in London. The metal surged 2.4 per cent on Wednesday. The precious metal in futures trading on the New York Merchantile Exchange traded higher at $1,093.70.  Analysts said RBI’s purchase of gold from IMF “could give rise to further diversification into gold in coming sessions as investors shy away from the dollar toward physically backed assets.”

They said the precious metal has risen 25 per cent this year in London as the Dollar Index, which measures the greenback’s performance against the euro and five other currencies, dropped 6.4 per cent. 

IMF got ‘good price’

IMF said it got a “good price,” and wants to be similarly “lucky” in the next phase sale of the precious metal. The sale price of gold to the RBI is expected to be under $1,045 per ounce, nearly $200 per ounce higher than what it would have been anticipated in mid-September, a senior IMF official told reporters in a teleconference.

Announcement to sell

When the IMF Executive Board at its meeting on September 18 announced to sell 403.3 tonnes of gold — one-eighth of the Fund’s total holding –- the prevailing market price of the bullion at that time was about $850 an ounce. “Obviously, it’s a good price relative to the original assumptions,” the IMF official said. 

“Of course, this is only half the sale that we have completed, so we don’t want to get ahead of ourselves. We still have another half to go. I hope we’ll still be lucky,” he said.

The official said the good price received for its gold from India would certainly help the multilateral lending agency to meet its target of stepping up financing to poor countries.

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