IMF sells 200 tons of gold to India for first sale in nine years

The transaction, equivalent to 8 percent of global annual mine production, involved daily sales from Oct. 19-30 at market prices and is in the process of being settled, the IMF said in a statement Monday. The average price to India, the biggest consumer, was about US$1,045 an ounce, an IMF official said on a conference call. Gold for immediate delivery gained 0.2 percent.

“The fall in the U.S. dollar seems to be pushing all the central banks to strengthen their portfolio with gold,” said N.R. Bhanumurthy, professor at the National Institute of Public Finance and Policy in New Delhi.

The IMF 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. Asian nations, which have amassed stockpiles of foreign currency reserves since the 1998 financial crisis, have shown increased interest in diversifying out of U.S. assets as the dollar loses value against other currencies.

Gold for immediate delivery gained to US$1,061.60 an ounce at 3:42 p.m. in Singapore and was about US$9 below its record US$1,070.80 an ounce reached Oct. 14.

“The most important thing is that people want gold even at these prices,” said Ghee Peh, head of mining research, with UBS AG in Hong Kong. “There's good support for prices for now” from the IMF's disposal of bullion, he said.

Proceeds from the sales and other IMF resources as well as individual contributors would help pay for discounted interest rates on loans to low-income countries, the IMF said in July. It plans to grant as much as US$17 billion in extra loans to poor nations through 2014. The 403.3 tons the IMF agreed to sell amount to one-eighth of its stockpile.

“This transaction is an important step toward achieving the objectives of the IMF's limited gold sales program, which are to help put the fund's finances on a sound long-term footing and enable us to step up much-needed concession lending to the poorest countries,” IMF Managing Director Dominique Strauss- Kahn said in an e-mailed statement.

The gold purchase was done as part of Reserve Bank's foreign exchange reserves management operations, the central bank said in a statement on its Web site Tuesday.

India's foreign-exchange reserves advanced US$684 million to US$285.5 billion in the week ended Oct. 23, the central bank said Oct. 30. That included foreign-currency assets of US$268.3 billion, gold reserves of US$10.3 billion and the special drawing rights with the IMF.

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