India's Reserve Bank buys half of IMF's gold for sale

Submitted by cpowell on 04:48PM ET Monday, November 2, 2009. Section:

That is, the sale has been arranged at market prices over the past two weeks, during which the gold price has remained strong, and the gold has been sold to another central bank and has not hit the general market, at least not yet.

But whether the Reserve Bank of India will use the gold for market intervention, open or surreptitious, is another question, and such use must be suspected. After all, India is the biggest market for gold, and the transfer of IMF gold to India could facilitate the dampening of that market if the Reserve Bank of India is inclined to try intervention to support the rupee or the U.S. dollar.

Even so, the proceeds of the IMF's sale to India, $6.7 billion, seem like peanuts, not even half as much as would be needed for a respectable bailout on Wall Street. Even if this gold was to be quickly resold into the general market, it probably would not go far.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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IMF Sells Gold to Central Bank of India

By Sandrine Rastello
Bloomberg News
Tuesday, November 3, 2009

Proceeds from the sales and other IMF resources as well as individual contributors would help pay for discounted interest rates on loans to low-income countries, the IMF said in July. It plans to grant as much as $17 billion in extra loans to poor nations through 2014.

The IMF, which helped shore up economies from Pakistan to Iceland over the past year, has sold gold on several occasions in the past. The last transaction was authorized in December 1999 and took place off-market between then and April 2000.

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International Monetary Fund Press Release

IMF Announces Sale of 200 Metric Tons
of Gold to the Reserve Bank of India

Press Release No. 09/381
November 2, 2009

As previously announced (see Press Release No. 09/310), in accordance with the guiding principle of avoiding disruption of the gold market, the IMF's Executive Board adopted modalities for the gold sales consistent with guidelines it had earlier established. In particular, the Fund 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. Thereafter, on-market sales of any amounts remaining from the 403.3 tons would be conducted in a phased manner over time, following the approach adopted successfully by central banks participating in the Central Bank Gold Agreement.

As previously indicated, the Fund will inform markets before any on-market sales commence, and will report regularly to the public on progress with the gold sales.

Useful links:

Gold Sales—FAQs:

>http://www.imf.org/external/np/exr/facts/gold.htm

Press Release on Gold Sales:

http://www.imf.org/external/np/sec/pr/2009/pr09310.htm