By Geena Paul
NEW YORK (Commodity Online): Again, the bullion market is abuzz with talks that the International Monetary Fund (IMF) is ready to offload its 191 tonnes of Gold in the market. This means the IMF will sell its gold to one of the official holders of the metal after considering bids by all interested parties.

When the IMF did a sale of this kind in October last year, the gold market saw a flurry of activities and the prices soared to new heights. Gold struck a record high rising above $1,178 an ounce in November last year following the IMF sale of 200 tonne gold to India’s Reserve Bank. Gold had jumped nearly 13 per cent since the beginning of November as investors poured money into the precious metal after India’s central bank bought the metal from IMF. The central banks of Russia and Sri Lanka had separately bought gold after India’s move in 2009 end.

If you taking into consideration, the price rise witnessed in the bullion market after the first phase sale of gold by IMF, this time around the bullion market will witness another jump in gold prices as the yellow metal will see new investors rushing to possess it.

Only thing which may play spoilsport in gold prices now will be the news that global economies are on way to recovery and several developed nations have already come into positive regions from their negative growth a year ago.

With investors putting their money in safe haven gold during the past cuple of years, the good news may encourage them to shift their money from bullion to equity markets, which are now showing signs of a bull run.

However, IMF’s on-market sales will be carefully phased over time. In February the total quantity remaining to be sold with IMF is 191.3 tonnes. Participants in the Central Bank Gold Agreement have noted that the IMF’s sales can be accommodated under the agreed ceilings of 400 tonnes annually and 2,000 tonne in total during five years beginning in September 2009. The average sales price so far has been slightly above $1,050 per ounce, which is more than it was assumed when the gold sales were approved by the executive board.

The IMF may sell gold outright on the basis of prevailing market prices and may accept gold in the discharge of a member country’s obligations, as loan repayment at an agreed price, based on market prices at the time of acceptance. Such sales would reduce the amount of gold to be sold on the market.

Whatever may be the option the IMF is taking, the market is eagerly waiting for the IMF to download its gold so that investors can plan their future investments as per the market reaction.

Gold prices had fallen in the last few months in anticipation of the gold sale. From a high of $1,200 an ounce in August, the London spot market prices were down 12 per cent to $1,100 last week.

Some analysts believe that though the prices have dipped in the last few months, the waning demand in the US, the European Union and West Asia, coupled with the IMF’s gold sale may pull down prices further.

Most of the central banks in the Western and European countries may not have evinced interest in the IMF’s sale as they themselves are trying hard to come out of the recession.

The World Gold Council said gold demand in West Asia fell 33 per cent last year to 73.9 tonnes against 109.5 tonnes in 2008, due to record prices and economic worries. In the December quarter, the jewellery demand in the UAE dropped 32 per cent compared to the same quarter of 2008.

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