Gold hits record after RBI buy1 min read . Updated: 04 Nov 2009, 09:58 PM IST
Gold hits record after RBI buy
London: The price of gold leapt to a record peak of $1,095.40 (Rs51,593) an ounce in trading here on Wednesday in the wake of the massive sale of the precious metal by the International Monetary Fund (IMF) to India.
Gold had already reached a record high of $1,087.80 on Tuesday as IMF said it had sold 200 tonnes of gold to India’s central bank over a two-week period last month for $6.7 billion to bolster its finances.
After spiking to a new high on Wednesday, gold pulled back to $1,091.75 in London.
“Gold is still benefiting from news that, at the end of October, India bought 200 tonnes of gold from IMF at market prices," said Commerzbank analysts.
“This transaction is an indication that, despite the prevailing high price level, central banks from emerging economies are still willing to accumulate gold to diversify their currency reserves," they added in a note to clients.
Gold and other commodity prices have surged in recent months amid a move away from the dollar, which has been slumping. The move accelerated last month on a report that Gulf states may stop using the greenback for oil trading.
The metal is also winning support from fears over a possible spike in inflation, as gold is widely regarded by investors as a safe store of value.
Bart Melek at BMO Capital Markets said the big sale of gold to India gives credence to the theory that there are official buyers waiting in the wings for large amounts of available gold.
The sale to India, as first reported by Mint on Tuesday, was nearly half the 403.3 tonnes of gold that IMF has targeted for sale over the coming years.
The Washington-based IMF, which currently holds 3,217 tonnes of gold, is the third largest official holder of the precious metal after the US and Germany.
India is the world’s biggest consumer of gold, importing between 700 and 800 tonnes of the metal every year or 20% of global demand.
Gold’s price, which has risen more than 20% this year, has a bright future thanks to improving demand caused by the financial crisis, industry experts said this week.
“Although it’s difficult to predict in the short term, the overall picture is very healthy," Mark Lynam, an executive for AngloGold Ashanti—the world’s third largest gold producer—told the London Bullion Market Association annual conference in Edinburgh.