India gains $800mn on IMF gold deal
27 Nov 2009
With gold prices surging almost every day this month to a record $1200 per ounce, the biggest gainer in the market these days is India's central bank-the Reserve Bank of India (RBI). At current market rates, the RBI may have benefited by as much as $800 million on its investment of over $6.7 billion for the purchase of about 200 tons of gold from the International Monetary Fund (IMF).
The gain has been made in a span of just over three weeks after the purchase. Market pundits are saying that the move by the RBI was probably the smartest move made in recent times by any player in the bullion market. The move came even as China, the player most expected to pick up the IMF gold, was waiting for prices to come down.
But China may also be on an alternative strategy – it is simply purchasing the gold that is being mined within the borders of its country. It became the world's largest gold producer last year by overtaking South Africa, and is now set to overhaul India as the world's largest consumer as well.
The market is now rife with speculation that the Indian central bank may be lining up to pick up another tranche of the metal from the IMF.
India's move to pick up the metal has a historical significance. In 1991, the government was compelled to pledge gold with the Bank of England so that money was available to pay for imports.
As per an earlier announcement, the IMF has now 203 more tons of gold on sale. Should India pick up thus tranche as well, it would bring the tally of its recent gold purchases up to 401 tons.
