Breaking News-2009.11.03

 

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Date 2009-11-3 Source Bloomberg
IMF Sells Gold to Central Bank of India, Netting $6.7 Billion

By Sandrine Rastello

Nov. 3 (Bloomberg) — The International Monetary Fund said it is selling 200 metric tons of gold to the Reserve Bank of India for about $6.7 billion, its first sale of the precious metal in nine years.

The sale accounts for almost half the 403.3 tons that the Washington-based lender in September agreed to sell as part of a plan to shore up its finances and lend at reduced rates to low- income countries.

……

The transaction, which involved daily sales from Oct. 19-30 at market prices, is in the process of being settled, the IMF said in the statement. The average price in the transaction with India was about $1,045 an ounce, an IMF official said on a conference call with reporters.

The lender has said it is ready to sell directly to central banks and later make transactions on the open market if necessary. The IMF official declined to say whether other central banks have expressed interest in purchases.

The 403.3 tons the IMF board agreed to sell amount to one- eight of its stockpile. Gold prices reached a record of $1,072 an ounce on Oct. 14 and have gained 45 percent from a year ago.

Gold futures for December delivery jumped $13.60, or 1.3 percent, to $1,054 an ounce on the New York Mercantile Exchange’s Comex division yesterday, the highest closing price for a most-active contract since Oct. 23.
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Says Kalidas….

Looks like Government of India has read my book, especially a chapter on Gold ( I had sent them a copy which was acknowledged)

I have been campaigning in this column that RBI/MOF should make active market in Gold by minting gold bullion bars with the stamp of RBI Mint for sale to Indian savers. It looks like they have finally acted.

To me it appears that RBI may be coming out with 5, 10, 20, 50, 100 gm and 1 kg bars with 9999 purity for sale to the Indian retail buyers and jewelry trades.  Most banks may be selling gold in this form. They might be asked to make two way markets – so that the consumers are not cheated out by others.

It is possible that inventories held by the banks might qualify as part of “Cash Reserve” – it should be because it is.

The move also suggests that Government of India has finally decided to make a break with the dollar and diversify its holding / reserve into Gold. In future, almost all Central Banks will ask GOI whether it would be a buyer of their gold.

Those who feared that large quantity of sale of gold by IMF might depress the gold prices should have second thoughts. There will be no more gold in the market.

Indian Rupee will also attract lot of appeal. There will be more gold backing even if unofficially in future. Who would buy Swiss Franc when emerging strong economy like India has Rupee backed by gold?

I am sure Government of India will make over 200% profits in less than two years.

 Posted by at 9:59 pm

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