LONDON: The price of gold leapt to a record peak of $1,095.40 an ounce in trading here on Wednesday in the wake of the International Monetary Fund’s massive sale of the precious metal to India. Gold had already reached a record high of $1,087.80 on Tuesday as the IMF said it had sold 200 tons of gold to India’s central bank over a two-week period last month for $6.7 billion to bolster its finances.
After spiking to a new high Wednesday, gold pulled back to $1,091.75 in London.
“Gold is still benefiting from news that, at the end of October, India bought 200 tons of gold from the IMF at market prices,” said Commerzbank analysts.
“This transaction is an indication that, despite the prevailing high price level, central banks from emerging economies are still willing to accumulate gold to diversify their currency reserves,” they added in a note to clients.
Gold and other commodity prices have surged in recent months amid a move away from the dollar, which has been slumping. The move accelerated last month on a report that Gulf states may stop using the greenback for oil trading.
The metal is also winning support from fears over a possible spike in inflation, as gold is widely regarded by investors as a safe store of value.
Bart Melek at BMO Capital Markets said the big sale of gold to India gives credence to the theory “that there are official buyers waiting in the wings for large amounts of available gold.
“The question now is, who buys the rest of the IMF gold?” said Melek.
“We suspect it may be China, other Asian countries, Russia or even India again, as they hold relatively little gold relative to their very large foreign-exchange reserves, and may want to diversify away from US dollars.”
The sale to India was nearly half the 403.3 tons of gold that the IMF has targeted for sale over the coming years.
The IMF, which currently holds 3,217 tons of gold, is the third-largest official holder of the precious metal after the US and Germany.
India is the world’s biggest consumer of gold, importing between 700 and 800 toes of the metal every year or 20 percent of global demand.
A senior IMF official said that the IMF was “lucky” in selling the 200 tons to India for roughly $1,045 an ounce, compared with $850 an ounce in April 2008.
Gold’s price, which has risen more than 20 percent this year, has a bright future thanks to improving demand caused by the financial crisis, industry experts said this week.
“Although it’s difficult to predict in the short term, the overall picture is very healthy,” Mark Lynam, an executive for AngloGold Ashanti – the world’s third largest gold producer – told the London Bullion Market Association annual conference in Edinburgh.
London emporium Harrods last month surprised the retail industry by starting to sell gold bars, with prices fluctuating according to the current market price. – AFP
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