Last Updated : 03 November 2009 at 06:55 IST

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

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LONDON (Commodity Online): The ambitious gold sale plan of the International Monetary Fund (IMF) has been kick-started with the sale of the yellow metal to India, the world's largest consumer and importer of gold.

IMF said on Monday that it has sold 200 tonnes of gold to the Reserve Bank of India for a total of $US6.7 billion ($NZ9.5b) as part of the global institution's plans to increase its lending resources.

The sale is part of an agreement struck in September among IMF member countries to sell 403.3 tonnes of the fund's gold stocks to diversify its sources of income and to increase low-cost lending to poor countries.

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

"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"

A senior IMF official, speaking on condition of anonymity, told a conference call the gold sales were conducted daily over a two-week period from Oct. 19-30, to "give some protection to short-term fluctuations in the market".

The official said India's central bank paid on average about $US1,045 ($NZ1481) an ounce for the gold and the transaction would be paid in hard currency and not in IMF Special Drawing Rights, the IMF's internal unit of account.

Spot gold prices have rallied since September as dollar weakness has helped to spur consecutive weeks of gains. Gold hit a record high last month of $US1,070.40 ($NZ1517.86). On Monday, gold rose above $US1,060 ($NZ1503) an ounce as the dollar fell against the euro.

The IMF official declined to say whether other central banks have expressed interest in buying the remaining 203.3 tonnes of gold on tap for sale. He said if no other central banks came forward, the IMF would proceed as planned to sell the gold in the market.