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22 September 2009 at 16:15 IST
Will IMF gold sale plan hit prices?
NEW DELHI/NEW YORK (Commodity Online): The International Monetary Fund’s (IMF) decision to sell 4.3 tonnes of gold is certain to hit the gold prices in India.
The sign of that was visible on Monday when the prices declined by about Rs 100 to Rs 15,945 per 10 gram in India.
However, IMF had said that sales volumes would be strictly restricted to 403.3 tonnes and it would be conducted under modalities that safeguard against disruption of the gold market.
On Monday selling pressure was evident after gold in the overseas markets fell below $1,000 an ounce following reports that the IMF had approved bullion sale. A rebounding dollar also reduced the demand for gold.
However, market analysts said the IMF’s decision is unlikely to have a major impact on the market at a time when prices of the metal are at a near-record high.
The IMF said its executive board had endorsed the sale of 403.3 tonnes of gold, worth about 13 billion dollars at current prices, to boost its lending capacity to poor countries.
Gold prices jumped last week to within grasp of record highs above $1,000 per ounce on the back of a weak dollar and mounting economic optimism.
The 186-nation institution said the decision was a core element of a new income model to make it less dependent on its lending revenue to cover expenses, such as surveillance of members’ economic and financial policies that the board had approved in April 2008.
The Group of 20 key developed and developing countries, at their April summit in London, agreed the gold sales should allow the IMF to offer favorable conditions on loans to the poorest countries.
The IMF decision came ahead of a two-day G20 summit in Pittsburgh, Pennsylvania, that opens on Thursday.
The gold sale plan has been increasingly discounted by the market’ since the initial approval, analysts said.
Analysts noted IMF’s intention to maintain orderly gold sales and market stability, citing safeguards such as selling off-market to central banks or other official sectors, selling slowly — potentially over several years — and capping any on-market sales to levels within the new Central Bank Gold Agreement.
Under the pact, European central banks agreed to limit their gold sales to 400 tonnes a year.
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