The International Monetary Fund said it would soon begin sales of 191.3 tonnes of gold remaining in its plan to raise new resources for lending, with traders saying it may seek buyers among Asian central banks.
But a drop of 1 per cent in gold prices after the news also rekindled worries about an increase in supply — nearly four months after India’s purchase of 200 tonnes boosted the country’s gold holdings to the 10th largest among central banks.
The IMF announced last year it would sell 403.3 tonnes of gold, about one-eighth of its total stock, to diversify its sources of income and increase low-cost lending to poor.
The sale weighed on the currency in Australia, which is the world’s No. 2 gold exporter, and was partly blamed for a drop in oil prices below $77 a barrel.
The open-market sales “will be conducted in a phased manner over time”, the Fund said, to avoid disruptions of the gold market. The Fund left the door open for central banks to keep buying gold directly from it.
“I will not be surprised if the Reserve Bank of India or other Asian central banks opt for it,” said Rupa Rege Nitsure, chief economist at Bank of Baroda.
“After the global financial crisis, everybody knows that with a longer term perspective it is not desirable to have concentration of reserves in any one currency. Everybody is trying to diversify.”
Gold slipped to $1,102 an ounce in Asia after volatile trade on Wednesday, when it hit an intraday high of $1,126.85 an ounce, its strongest since January 20, before tumbling to below $1,110 after the IMF announcement
The price of gold has increased by 20 per cent over the past two years. The prospects of more buying from central banks helped fuel a rally to a record above $1,200 early last December.