Last Updated : 21 September 2009 at 17:30 IST

Gold prices slump over IMF gold sale concerns

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MUMBAI (Commodity Online): The International Monetary Fund's (IMF) decision to sell 403 tonnes of gold has led to a slump in gold prices in global markets, and key bullion markets like India.

Last week-end, the International Monetary Fund (IMF) announced that it is finally selling 403 tonnes of gold after months of speculation over the sale and its presumed impact on bullion markets.

IMF said in a statement the sales would be in a volume strictly limited to 403.3 tonnes, with these sales to be conducted under modalities that safeguard against disruption of the gold market.

The IMF said the decision was a central element of a new income model for the institution that had been approved by the executive board in April 2008.

On Monday, gold prices in India tumbled by Rs 100 to Rs 15,945 per ten grams in the national capital on Monday on selling due to concerns over the IMF-approved gold sale.

Selling pressure gathered momentum after gold in the overseas markets fell below $ 1,000 an ounce following reports that the International Monetary Fund had approved bullion sale, in addition to a rebounding dollar that reduced the demand for gold.

Retailers bought for the current festival and marriage season amid heavy selling by stockists, which failed to check a fall in both the precious metals. The IMF approved the sale of 403.3 metric tons of gold valued at about $ 13 billion to raise funds t o support weaker countries.

Also, the US Dollar Index gained for a second day on speculation that US policy makers might withdraw economic stimulus measures. In London, gold prices lost $ 11.63 or 1.2 per cent to $ 995.97 an ounce and silver fell by two per cent to $ 16.66 an ounc e.

Marketmen said traders were in overbought positions during the last fortnight to prepare for rising demand for the current festival and marriage season. They said the IMF's decision to sell a large quantity of gold from its reserve had a negative impact on the bullion market, forcing stockists to reduce their holdings.