IMF sells 200 tonnes of gold to India worth $6.7 billion

Rage

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IMF sells 200 tonnes of gold to India worth $6.7 billion

AFP 3 November 2009, 07:07am IST



WASHINGTON: The International Monetary Fund announced on Monday the sale of 200 tonnes of gold worth 6.7 billion dollars to India's central bank to shore up IMF finances.

The sale to India was nearly half the amount that the Fund has targeted for sale over the coming years.

The IMF said the transaction, which was in the process of being settled, involved daily sales that were phased over a two-week period during October 19-30.

Each daily sale was conducted at a price set on the basis of market prices prevailing that day, it said, in accordance with the institution's founding document.

"I strongly welcome this transaction with the Reserve Bank of India," Dominique Strauss-Kahn, the IMF managing director, said in a statement.

"This transaction is an important step toward achieving the objectives of the IMF's limited gold sales program, which are to help put the fund's finances on a sound long-term footing and enable us to step up much-needed concessional lending to the poorest countries."

The Washington-based IMF, which currently holds 3,217 tonnes of gold, is the third-largest official holder of the precious metal after the United States and Germany.

On September 18, its executive board approved the sale of 403.3 tonnes of gold, about one-eight of its current holdings, but assured it would do so in a way that would prevent disruption of the gold market.

Under the plan, the IMF offers to sell gold directly to central banks "or other official sector holders if there were to be interest from such holders."

If official demand were insufficient, the IMF said it could conduct the gold sales "on-market in a phased manner over time," in line with an approach already followed by central banks.

The IMF would be constrained by the overall ceilings agreed by the central banks, which started on September 27, of 400 tonnes annually for the next five years.

The IMF reiterated Monday its commitment to inform markets before any on-market sales begin.

The IMF has made gold sales a key element of its new income model aimed at lowering its dependence on lending revenue to cover expenses.

The Group of 20 key developed and developing countries, at their April summit in London, agreed the gold sales should allow the IMF to offer favourable conditions on loans to the poorest countries.


IMF sells 200 tonnes of gold to India worth $6.7 billion - International Business - Biz - The Times of India
 

Rage

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What the what the?

Anybody with a sound knowledge of the current monetary situation care to take a shot at why the Central Bank's gone ape$hit over gold and bought "nearly half the amount that the Fund has targeted for sale over the coming years"?

Or are we going the china way by buying "200 tonnes of gold worth 6.7 billion dollars to shore up the IMF's finances"?

Bullion, anybody?
 

nitesh

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Rage the rate in India for gold is around 17-18k per 10g as of now which is about to be shot up to 20k in 2-3 years hence I think it is a good buy :)
 

AkhandBharat

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It could also be to reduce the dollar reserves, since it has been predicted to depreciate in value in the short term. Investing in Gold is a prudent choice. It will reinforce the rupee if RBI decides it needs that.
 

p2prada

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What the what the?

Anybody with a sound knowledge of the current monetary situation care to take a shot at why the Central Bank's gone ape$hit over gold and bought "nearly half the amount that the Fund has targeted for sale over the coming years"?

Or are we going the china way by buying "200 tonnes of gold worth 6.7 billion dollars to shore up the IMF's finances"?

Bullion, anybody?
Kick out all the excess Dollars. Devalue the Rupee for further gains in exports. Gain a major vote in the IMF(since they lend to Pakistan) and get a lot of gold for the post recession market. :D
 

tarunraju

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I think this is a sound decision given our gold market prices. It also ensures our dollars are converted to something that's really stable and appreciative in the global market.
 

Singh

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Gold is a secure investment but doesn't always gives returns.

For eg 850$ invested in Gold in 1980 would've yielded today only 1060$ adjust that for various parameters and its a negative roi.

Gold rates usually shoots up in times of economic crises and bear runs. And during times of bull runs (which generally last much longer than bear runs) Gold rates should tend to fall.
 

RAM

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IMF sells 200MT gold to India

IMF sells 200MT gold to India


The International Monetary Fund (IMF) has sold $6.7 billion worth of gold to boost its own cash reserves, the crisis-lender said on Monday, completing about half of a sale that was authorized in September. The IMF said it sold 200 metric tons to India’s central bank over a two-week period from October 19-30Its executive board has agreed to sell a total of 403.3 tons, or about one eighth of the IMF’s gold reserves.

IMF Managing Director Dominique Strauss-Kahn said the sale marked an “important step” in the lender’s effort to secure its finances and step up lending programmes for poorer countries. The IMF said the sale was made at prevailing daily market prices. The lender is looking toward other central banks to complete the remaining gold sale but has said it will consider selling the cache in the open market.

The Reserve Bank of India's gold stock has shot up by more than 55 per cent with the purchase of 200 tonnes of IMF gold at an estimated cost of USD 6.7 billion.

RBI, which pledged gold during 1991 crisis with the Bank of England to raise resources to meet external obligations, today said it has purchased 200 tonnes of gold from International Monetary Fund (IMF) for USD 6.7 billion.

"The Reserve Bank has decided to buy some gold...About 200 tonnes. That's normally we do (from) time to time. IMF is selling gold so we wanted to buy it," Finance Minister Pranab Mukherjee said in New Delhi.

When asked whether it was a reflection of the growing economic strength of the nation, Mukherjee quipped, "the conclusion is yours."

RBI has purchased almost half the gold which the IMF plans to sell to raise resources to augment its operations and provide concessional loans to poor countries.

"The purchase was an official sector off-market transaction and was executed over a two week period during October 19-30, 2009 at market based prices," RBI said in a release.

The decision to purchase gold will raise RBI's stock of the precious metal from 357 tonnes to 557 tonnes, representing an increase of over 55 per cent.

Of the RBI's current gold stock of 357 tonnes valued at around USD 9.6 billion, 65 tonnes are being held abroad since 1991 in deposits with the Bank of England and Bank for International Settlement (BIS).

Besides taking other steps to tide over the balance of payment crisis in 1991, RBI had pledged gold with the Bank of England to raise funds.

India's foreign exchange reserves, in the aftermath of the Gulf crisis, dipped to USD 5.8 billion tonnes as on March 31, 1991.

The forex reserves, however, started picking up with the onset of the liberalisation policies and peaked to USD 314.61 billion at the end of May 2008.

The high level of foreign exchange reserves, which stood at USD 280 billion as on September 25, 2009, prompted the central bank to increase its stock of gold by purchasing that from the IMF.

The IMF, in pursuance of the decisions taken at the G-20 summit in London, had decided to sell about 403.3 metric tonnes of gold to shore up its finances so that it can lend money to the poorest countries at concessional rates.

"This transaction is an important step toward achieving the objectives of the IMF's limited gold sales programme, which are to help put the Fund's finances on a sound long-term footing and enable us to step up much-needed concessional lending to the poorest countries," IMF Managing Director Dominique Strauss-Kahn said in a statement.


The Hindu : Business News : IMF sells 200MT gold to India

news.outlookindia.com | RBI Buys 200 MT Gold from IMF
 

AkhandBharat

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What Happens to Gold at Dollar's Crossroads?

The US Dollar -- the currency precious metals are priced in -- is standing at a crossroads today: The possibility of a breakout to the upside has grown in the past week, but the trend still remains down. So, what are the implications for the precious metals?

One road is a final plunge following the recent small rally. The other is a breakout to the upside from the severe downtrend it's been jammed in since early March. Should that take place, a rally could gain strength from panic short-covering. Sentiment (in terms of positions taken by commercial and non-commercial parties as measured in the Commitment of Traders report) for the dollar is universally bearish. Forex Options and Futures markets show US Dollar sentiment at near-record bearish extremes against almost all major counterparts.

I suppose that your email inbox is inundated with newsletters with headlines such as: "Dollar Forced to Abdicate," "End of US Dollar Global Reserve Currency," "Faces of Death: the US Dollar in Crisis,” to name just a few.

Could this one-sided positioning in the futures marker suggest that the USD is near a major turning point?

If you follow the fierce debate that's erupted in recent weeks between the two major camps in monetary circles, you get the sense that both sides are passionate in their beliefs. The gold bulls/dollar bears believe that gold is poised to take off while the dollar is perched for a collapse. The other camp -- the gold bears/dollar bulls -- claim just the opposite.

You don’t need the results of a sentiment poll mentioned on CNBC recently that nearly 98% of all respondents were bearish on the US dollar. Just listen to the people you know talk about the greenback. I doubt you'll find even one among your acquaintances who's bullish on the dollar. The public is worried that the only way to handle America’s massive debt is with stealth devaluation over a long period of time.

Is it possible that the policy markers in Washington will allow the mighty dollar to plunge to new depths? Sure it is -- if the only alternative is to admit that the previous monetary policy was wrong and that a crisis should have taken place many years ago along with higher unemployment in the past, and publicly state that US citizens now have to pay for all that with even higher unemployment and a lower standard of living.

Let’s go back to the CoT analysis. As I already mentioned a month ago, the CoT analysis (just like everything else) should be put into proper perspective before putting your money on the stake. While commenting on the CoT situation in gold, I wrote the following:


The remarkable thing that is often overlooked in the CoT analysis is that since two previous huge rallies took place when the CoT was unfavorable. Therefore, it seems logical for one to expect a similar thing also here. Guess what -- that is exactly what we see today. The latest CoT report shows that the net short position of the Commercial Traders has reached a new extreme. The popular interpretation is that a sell-off is inevitable, but such situation is precisely what we've seen near the beginning of the 2005-2006 and 2007-2008 massive rallies.


I wrote the above when gold was under $1,000 and many CoT analysts warned about the coming plunge, which would have made you miss sizable gains since that time. However, I didn't quote the previous update with the intent to say “told you so." I quoted it because I wanted to emphasize the influence that using numbers without regard to anything else can be unprofitable.

Getting back to the USD situation -- the CoT reports indicate near-record bearish extremes, but... isn’t the US Dollar also near its all-time lows? The difference between 76 and 72 on the USD Index is huge only if you focus on the short term. Taking a look at the 20-year USD Index chart reveals that the dollar is, indeed, near record lows.



The point is that if the price is extremely low, then similar readings from the CoT reports are to be expected, and thus don’t prove a bullish point here. They would, if the value of the USD Index was much higher, and the sentiment was extremely weak. But low prices simply correspond to low sentiment, also in terms of CoT reports. Consequently, there's no divergence that would indicate higher values of USD Index ahead.

Don’t get me wrong -- if CoTs would indicate that a move lower is likely, that would be a strong bearish signal given that we're already low. However, the situation here is asymmetrical, meaning that negative CoTs at this point are neutral.

Therefore, the most likely direction in which the USD Index will head next is the one according to the current trend, which is down. This is bullish for gold and silver.

Speaking of gold, it's just briefly (and successfully) tested the previous 2008 high, which makes a following rally more and more likely.




The test was sharp and price reversed quickly, which on one hand, flashes a green light that the previous top has been verified. On the other hand, it proves the strength of the bull market. In other words, although price is lower than a few weeks ago, it’s a bullish phenomenon.

There are also other bullish factors on the above chart, and these are the RSI and Stochastic indicators. The Relative Strength Index is rather popular, so I won’t go into details here. The point is that it's currently right in the middle of its scale (near 50), so a rally from here is certainly possible. It's not undervalued nor screaming “buy gold on margin!” but it's nowhere near the overvalued level marked with the red horizontal line.

The other indicator that I featured above is the Stochastic indicator. It's not very useful in timing tops in gold, as it tends to stay in the overbought territory for weeks before the top is put. But it's not a top that we're focusing on here, and as far as local bottoms are concerned, this indicator is much more useful. Please take a look at its performance and reliability -- virtually every time it dropped to the level marked with the blue horizontal line, it meant a great buying opportunity. This level has just been touched, so the technical picture for gold becomes even more bullish.

Summing up, the situation in the dollar market doesn't look favorable, but that's the case with gold. The recent action in the general stock market may pose a threat to a part of the precious-metals market because of their historical correlations, but the gold market itself seems to be ready to soar once the trend in the dollar is resumed.
What Happens to Gold at Dollar's Crossroads?
 

sob

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Since the 1970s when USA moved away from the Gold system the importance of Gold has been dwindling but in light of the current turmoil and period of uncertainity Gold has regained it's lost lusture.

Mint ePaper - Article

Jo h hn Maynard Keynes' ghost has been haunting financial markets for more than a year.
Both his ideas and his "barbarous relic"--gold--have staged a comeback. Does that mean the Gibson's paradox he pointed to--that interest rates and gold prices are correlated-- will also resurface?
The paradox was seen in a new light a decade or so ago: Long-term real interest rates and gold prices moved in opposite directions. Critics of easy money policy then claimed that Western central banks were selling gold to bring down gold wouldfor Mint is also available prices--which an Rs3 without suggest interest rate increase--and thus disguise their policies.
Now, when interest rates in the West are at rock bottom and affecting the dollar, central banks in emerging countries are actually buying gold.

This week, the Reserve Bank of India announced the purchase of 200 tonnes of gold.
China and Russia have been shoring up their gold reserves for some time, presumably to diversify away from dollar holdings.

So, where will real long-term interest rates, whose depression many claim to be a cause of the a combo crisis, offer go from here?
 

sob

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Even as stocks tanked, gold sizzled at a new peak on the bullion market in Mumbai. Standard gold (99.5 purity) surged by Rs 155 per 10 grams to end at Rs 16,240 from the overnight closing level Rs 16,085. Pure gold (99.9 purity) also shot up by Rs 160 per ten grams to close at Rs 16,325 as against Rs 16,165 on Monday
 

Yusuf

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India has come a full circle eh!! 18 years ago, India pawned its gold to the western banks to take care of the balance of payment crises. Now it buys their gold to fund them. Great going.

But then its a good move by the RBI to buy gold. Its always a safe investment and who better can vouch for it than us Indians who make a beeline to the jewelery store during Akshaya Triti and Deewali regardless of the price being at 10k, 13k or 17k.

RBI will buy more gold in the future as well. The percentage of gold wrt to the overall reserves had fallen to 3% and with this buy, it goes up to 6%.
Still India has over $200 billion in US treasury bonds which is a worry. China and Russia too have gone the gold way to take care of their dollar reserves.
 

qilaotou

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It's reported in Chinese media that private Indians own more than 15 thousand tones gold or goldwares. That's pretty impressive. When gold price goes up to 1500USD per ounce next year they are at least 50% richer. It's a good buy for Indians.
 

Yusuf

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I dont think there is any bulk buy discount on gold. Atleast not a big discount. Maybe they will ship the gold free of cost
 

thakur_ritesh

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What rate did we bought it for? I hope we must have got bulk buying rate.
buying rate was rs15,41,000/kg if you take the rupee trading at 46 to a usd which was more like the case when this deal was done, which is more or less in tune with the existing market rate in india where the price at present is hovering between 16-17ks.

discount could have been offered but then that would have been a low single digit figure.
 

Singh

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It's reported in Chinese media that private Indians own more than 15 thousand tones gold or goldwares. That's pretty impressive. When gold price goes up to 1500USD per ounce next year they are at least 50% richer. It's a good buy for Indians.
1. Private Gold Reserves in India are over 25-30 thousand tonnes. That is over 20% of all known Gold Reserves (above the ground).
2. Indians are the largest consumers of Gold and on an average buy over 800 tonnes of Gold per annum.
3. 25% of all Gold produced annually is bought by Indians; 2000-2500 tonnes of Gold is produced per annum.
 

hit&run

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Very orthodox mentality, India should invest in many other assets as well not overwhelmingly in gold. If one can predict (which is not possible) market then he can rule the world. By purchasing gold we are empowering the dollar. A economy importing more then exporting should consider such adventures wisely.
oh yes! one question RBI is not buying gold for domestic consumers ?
 

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