Commodity Online
MUMBAI: Will gold prices withstand the impact of IMF gold sales by year-end? It seems so, if the present trend is anything to go by.

According to experts, gold prices at present are strong enough to take the impact of the International Monetary Fund’s (IMF) plan to sell around 400 tonnes of gold by the end of the year.

Group of Eight nations have already given permission to IMF to sell the gold to raise funds for helping poor nations.

However, a final decision on the sale is yet to come. Market analysts said prices of the yellow metal, which is currently in favour as a safe haven investment, will not be impacted by this sale.

Experts said the IMF sale will equal approximately 25 per cent of average open interest calculated on past six months’ data on Comex Gold, which means that although there will be incremental supply of the metal in the market, it will most likely be absorbable.

Gold futures prices suggest that the market does not expect any major oversupply by the end of the year, with prices hovering around the $950 per ounce mark.

The report of the Committee of Eminent Persons chaired by Andrew Crockett proposed that IMF adopt a new income model with more diverse sources of income, so that it no longer relies primarily on lending income to finance its various activities, which include public goods.

According to IMF, one of the income sources the committee proposed is the creation of an endowment funded from the proceeds of this gold sale.

The IMF holds 3,217 tonnes of gold, making it the third largest official holder of gold. The IMF gold sale of 403.3 tonnes will be 10.7 per cent of the world’s annual gold demand and supply of 3,772 tonnes. IMF is unlikely to unload the entire block of 403 tonnes in a single tranche, thus easing any price pressures.

IMF will sell gold at the market price when the sales are conducted, and the sales could be phased over time to avoid market disruption.