11/03/09 Stockholm, Sweden – In a move that surprised many traders, the International Monetary Fund ended up selling 200 tons of gold to the Reserve Bank of India for $6.7 billion this month. Many expected most, if not all, of the sale to go to China. However, about half the original amount of gold, roughly 200 tons, is still up for sale and could go to China, another buyer, or be sold on the open market.
What matters to you, dear reader, is that the vast sum of gold was unloaded as an official sector off-market transaction, taking place over 11 days in late October at market-based prices. According to Eugen Weinberg of Commerzbank, this means that the “gold was kept off the market and sold directly to central banks so potential sales on market are limited by this.” In plain English, it appears that the IMF sale, while bullish for gold prices, has not directly impacted the physical market.
That said, the excitement alone behind the large purchase likely played a role in the spot gold price hitting a new all-time high today at $1,081 a troy ounce.
Several other factors contribute to gold’s positive price direction. First, the IMF still has half the gold left to sell, and that remainder could potentially be sold on the open market (although China and perhaps Russia remain potential buyers). Also, it provides further evidence that central banks are increasing their gold holdings and are willing to do so at current prices.
For its part, India has increased its gold reserves to become the tenth largest gold holder among central banks. It was 12th before the purchase.
More details are available in Reuters coverage of India buying half of the IMF’s gold for sale.
Rocky Vega
Rocky Vega is publisher of The Daily Reckoning. Previously, he was founding publisher of UrbanTurf and RFID Update, which he operated from Brazil, Chile, and Puerto Rico, and associate publisher of FierceFinance. He specialized in direct marketing at MBI, facilitated MIT Sloan School of Management programs, and has been featured on CBS. Vega graduated with honors from Harvard University, where he was on the board of Let’s Go Publications and directed business programs involving McKinsey, Goldman Sachs, and Harvard Business School faculty. He is also enrolled at the Stockholm School of Economics.
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thunder road reports the volume of gold turnover on the lbma at around 2300-2700 tons per day….200 isn’t even a spit in the grand canyon
They weren’t buying gold, they were getting rid of dollars.
What has happened to the great Mogambo? Has he quit,been fired,or on vacation? He is dearly missed.
I was wondering the exact same thing.
About Mogambo, that is.
This financial crisis will still be further magnified by the effects of an economic crisis, which will stop dealing on the exchanges and bring industry to a standstill. We shall create, (refereing to the international bankers) by all secret subterainian methods open to us, and with the aid of gold, which in all our hands, an international economic crisis, which will throw whole moibs of workers on to the streets throughout all the countries of the world. A good example of that is the present unemployment rate of over 10% in the U.S. If you count part time workers and people that have run out of unemployment benefits, and have givenup looking for work, it is close to 20% or more.
Respectfully James M Nunes
Monetary Reformer/Social Creditor