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Author: Lawrence Williams
The IMF announcement yesterday that it had sold virtually half of its planned 403.3 tonnes of gold, destined to increase its resources for lending to low-income countries, to India came as something of a surprise to the market. Not perhaps that a Central Bank had made the purchase, but the hard money had been on China to do so, not India.
Indeed, the market seemed, in retrospect, little affected by the news of the sale, which apparently involved daily sales that were phased over a two week period during October 19-30, with each daily sale conducted at a price set on the basis of market prices prevailing that day. It reached around $1,066 an ounce before falling back initially this morning in Europe to just below $1,060 at the time of writing.
But, one suspects that when the news really sinks in it will be positive for the gold price with at least a part of a significant prospective overhang being taken out of the marketplace. It would also seem likely that the IMF is negotiating with other Central Banks for the sale of the remaining 203.3 tonnes of gold. The IMF said in its press release that it "is standing ready for an initial period to sell gold directly to Central Banks and other official holders that may be interested in such sales." Under the Fund's Articles of Agreement, all gold sales must be conducted at prices based on market prices, including direct sales to official holders as in the case of this transaction.
India dumps dollars for IMF gold - is China next in line?
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