Gold jumps to record on purchase by India

November 3, 2009

From Surojit Gupta and Lesley Wroughton, Reuters:

The International Monetary Fund has sold 200 tonnes of gold to the Reserve Bank of India for $6.7 billion, quietly executing half of a long-planned bullion sale that has threatened to slow gold’s ascent….

…Although the IMF’s plan to sell a share of its gold holdings in order to increase low-cost lending to poor countries had been flagged for a year before it was formally approved in September, the speed, scale and identity of the buyer were a surprise….

….The market’s focus has now shifted to China, which has reportedly been in talks with the IMF about buying some of the fund’s bullion as Beijing seeks to shift some of its more than $2 trillion in foreign exchange reserves away from the U.S. dollar….

Already the world’s top producer of gold and rivaling India as a consumer, China revealed this year that it had quietly lifted its own government holdings of gold stocks to 1,054 tonnes from 600 tonnes when it last reported its holdings in 2003.

200 tons is decent chunk. I’ve seen varying estimates, but according to Peter Bernstein, the total supply of gold is 125,000 tons. That puts this single purchase at about two-tenths of one percent of the total.

4 comments

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key words: …as Beijing seeks to shift some of its more than $2 trillion in foreign exchange reserves away from the U.S. dollar….”

The dollar is toast. Wish I had bought some gold when I was young.

Posted by travian dude | Report as abusive

What is the liklihood of gold remaining over $1000 when the economic situation improves? This just seems like a dumb move to me.

Posted by al coholic | Report as abusive

Beijing cannot not seek to “shift some of its more than $2 trillion in foreign exchange reserves away from the U.S. dollar….”, it must either find a willing and able buyer of dollars and then sell these dollars, to create cash flow to buy gold, or buy it with cash reserves.

These transactions are negligible in the larger context in any event. This is just another version of market and media hysteria.

The question begs, from whom did the IMF buy the gold in the first place ?

Any which way, maybe it is good that % gold of foreign reserves be equalised to restore global economic imbalances between cash and credit economies.

Posted by Casper | Report as abusive

so what to do now, buy or sell?