The International Monetary Fund has sold 200 tons of gold to the Reserve Bank of India for $6.7 billion, quietly executing half of a long-planned bullion sale that has threatened to slow gold’s ascent.
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 IMF would sell 403.3 tons 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.
“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, the central banks are increasing their gold reserves. Last but not least the central bank gold agreement sales of 400 tons … is half empty already.”
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The majority of participants at the LBMA Precious Metals Conference in Edinburgh were bullish for gold’s outlook going forward. The chairman of the London Bullion Market Association, Kevin Crisp, said that the environment for gold prices is set to stay positive as concerns over the stability of other markets fuel investment into hard assets. The conference heard how the European Central Bank believe that gold will remain an important asset for European central banks as risk diversification becomes a more significant issue. Paul Mercier, deputy director general of market operations at the ECB, said that “gold makes sense as a contributor to risk diversification.” He said the Eurosystem holds 10,800 metric tons of gold, roughly one third of world gold reserves.
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