New Delhi: The International Monetary Fund (IMF) said it would soon begin sales of 191.3 tonnes of gold remaining in its plan to raise new resources for lending, with traders saying it may seek buyers among Asian central banks.
But a drop of 1% in gold prices after Wednesday’s news rekindled worries about an increase in supply—nearly four months after India’s purchase of 200 tonnes boosted India’s gold holdings to the 10th largest among central banks.
The open-market sales “will be conducted in a phased manner over time”, IMF said, to avoid disruptions of the gold market. IMF has left the door open for central banks to keep buying gold directly from it.
“I will not be surprised if the Reserve Bank of India or other Asian central banks opt for it (IMF’s gold),” said Rupa Rege Nitsure, chief economist at Bank of Baroda. “After the financial crisis, everybody knows that with a longer-term perspective it is not desirable to have concentration of reserves in a any one currency.”
Gold slipped to $1,102 (Rs50,912.40) an ounce in Asia after volatile trade on Wednesday, when it hit an intraday high of $1,126.85 an ounce, its strongest since 20 January, before tumbling to below $1,110 after the IMF announcement
The prospects of more buying from central banks fuelled the rally to a record above $1,200 in December.
IMF announced last year it would sell 403.3 tonnes of gold, about one-eighth of its total stock. Until now, the gold has only been made available to central banks on a first-come-first-serve basis. So far, India, Mauritius and Sri Lanka have purchased 212 tonnes of gold from IMF.
“We are still open to off-market sales, so that window has not closed,” IMF finance director Andrew Tweedie said, adding: “All that has happened now is that we are moving to also start on-market sales (based on market prices).”
“I think they want to test the market, whether central banks want to buy at this level,” said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong. “I think towards $1,000, you may see better demand.”