MUMBAI (Commodity Online): With the Indian central bank Reserve bank of India buying 200 tonnes of IMF gold at $6.7 billion, speculation is rife that the bank must have sold US Treasuries bills to grab the yellow metals.

According to a report appeared in the Economic Times, India’s leading business daily, The RBI may have sold US Treasuries to fund its gold purchase from the International Monetary Fund.

This purchase suggests that the Indian monetary authorities are seeking to change the composition of their foreign reserve holdings, most likely diversifying away from US Treasury securities, the report said.

The move was prudent as India needed liquid assets as a buffer against sudden, destabilising capital outflows.

The central bank has, however, refrained from disclosing the details of the transaction in its weekly statistical supplement released on Friday.

According to the RBI release, total foreign exchange reserves including gold and SDR (special drawing rights —the reserve currency with IMF) dipped by $1.129 billion to $284.4 billion during the week ended October 30. While foreign currency assets dipped by $1.580 billion, the value of SDR dipped $25 million. The value of gold in reserves rose $484 million to $10.8 billion.

Going by the current composition of reserves comprising various foreign currency assets, SDR, gold and reserves with the IMF, gold which is valued at the month-end bullion prices at the London bullion exchange has for long hovered around $10 billion and roughly accounts for 4% of the total reserves.

Had last week’s purchase been reflected in the latest reserves figures, the value of gold would have gone up by at least 50%. One would also know how the central bank has funded this purchase. According to an RBI official, the purchase was out of the foreign currency assets and not SDR, the report said.