No takers for IMF’s gold

London: An announcement by the International Monetary Fund (IMF) on Wednesday that it would soon begin phased sales of 191.3 tonnes of gold in the open market, has called into question demand for bullion from official sector buyers, or specifically, central banks around the world.

The IMF announcement on Wednesday said, ''Prior to any sales on the gold market, sales were first made exclusively to interested central banks, thus shifting gold within the official sector. Now the IMF will begin sales of the remaining gold on the market.''

The Fund said the sales "will be conducted in a phased manner over time" to avoid disruptions in the gold market. The sales are part of a programme launched last year to enable this international lending institution to create resources for poverty alleviation programmes around the world. (See: IMF to sell 403 tonnes of gold to boost lending resources)

What is causing some consternation in the market is the fact that on the same day that the IMF made its 'no sale' declaration and its decision to shift the sale to the open market, the World Gold Council, issued its quarterly Gold Demand Trends report, which highlighted the role of central banks as net buyers.

The report highlighted data indicating that central banks around the world were continuing to diversify their portfolios with an increased allocation to gold.  It revealed a significant reduction in net official sector sales in 2009, of 44 tonnes, as compared to an average of 444 tonnes over the five year period up to 2008, with central banks turning net buyers in the last three quarters of the year.

So the question being asked in the bullion markets is what went wrong with the IMF's attempt to place the bullion in the possession of some central bank through an 'official' transaction, albeit at market rates.