The Times of India reports that India buys 200 tons gold from IMF.
(emphasis mine) [my comment]
Full circle: India buys 200 tons gold from IMF
WASHINGTON/NEW DELHI: More than 18 years after New Delhi pawned 67 tons of gold to tide over a balance of payments crisis, the Reserve Bank of India has bought thrice that amount of gold from the International Monetary Fund to diversify its assets.
The IMF on Monday announced the sale of 200 metric tons of gold to the RBI, saying it represented almost half of the total sales volume of 403.3 metric tons that was approved by the Fund's Executive Board in September.
Welcoming the purchase of 200 metric tons of gold by India's RBI, IMF MD Dominique Strauss-Kahn said, "I strongly welcome this transaction with RBI."
"It is an important step toward achieving the objectives of the IMF's limited gold sales program, 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."
For India, the purchase, apart from signaling that its economy has come full circle, is a way of spreading its assets which are said to be currently over-weighted with foreign currency, mainly in the form of sovereign US Treasury bonds. In other words, it is a hedge against a falling dollar.
India is the world's largest private gold consumer, but the government's holding of gold as an asset is modest. Even so, the latest purchase puts it at Number 10 among the list of top 10 gold-holders in the world.
Of India's current foreign exchange reserves of nearly $285 billion, foreign currency assets account for more than 90% ($268.3 billion), followed by gold ($10.3 billion), IMF's Special Drawing Rights ($5.2 billion) and a reserve position in the IMF of $1.59 billion.
While India's current gold holdings, accounting for just 3.7% of assets, are said to be historically low, buying 200 tons in addition to the 358 tons it already holds is expected to bump up the gold reserves to more than 6%. The dash to gold is prompted by the unsteady dollar and countries such as China, Russia and Brazil have already gone this route.
Officials said the total sales proceeds are equivalent to US$ 6.7 billion at an average gold price of $ 1045 per ounce.
My reaction: India has bought 200 tons gold from IMF.
1) The IMF on Monday announced the sale of 200 metric tons of gold to the RBI, almost half of the total sales volume of 403.3 tons.
2) For India, the purchase is a hedge against a falling dollar.
3) China, Russia and Brazil are also shifting their reserves to gold.
4) The total sales proceeds were equivalent to US$ 6.7 billion at an average gold price of $ 1045 per ounce.
Conclusion: This is more evidence that the world is losing faith in the dollar.