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Our Bureau

Mumbai, Nov. 3

The Reserve Bank of India has purchased 200 tonnes of gold valued at Rs 31,490 crore ($6.7 billion) from the International Monetary Fund (IMF) under the latters’s limited gold sales programme.

“The purchase was done as part of the foreign exchange reserves management operations. It was an official sector off-market transaction, executed over a two-week period starting from October 19 at market-based prices,” the RBI said in a press release on Tuesday.

Of the total foreign exchange reserves of $286 billion as on October 23, the RBI holds gold valued at $10 billion. With the latest purchase, the RBI’s gold holding will touch 557.7 tonnes. India has come a long way since 1991, when foreign currency reserves shrank to almost nothing and default on external borrowings appeared imminent. The then Prime Minister, P. V. Narasimha Rao, and the Finance Minister, Dr Manmohan Singh’s immediate response was to secure an emergency loan of $2.2 billion from the IMF. The Government had to offer the country’s gold reserves as collateral.

According to the World Gold Council’s latest report, the RBI has become the 11th largest gold holder among various central banks, placing it ahead of the European Central Bank but behind Russia’s.

Mr Dominique Strauss-Kahn, Managing Director, IMF, said in a statement, “The transaction is an important step toward achieving the objectives of the IMF’s limited gold sales programme.”

The IMF Executive Board in September decided to offload 400 tonnes of gold annually, totalling 2,000 tonnes in the next five years, besides the regular on-market sale.

The IMF holds 3,217 tonnes of gold valued at $98.8 billion. The RBI’s latest move to build its reserves around gold comes close to the central banks of other countries showing a similar trend of shifting away from holding their assets in dollar.

Though the latest IMF sale will not have an impact on domestic gold prices, it would clear the misconception that the prices would crash post-IMF gold sale and reverse the weakening trend of dollar against other currencies.

The uptrend in gold prices may continue with global economic revival stoking concerns over inflation, said Mr Harish Galipelli, the Vice-President (Research), JRG Wealth Management.

“Investor confidence in the yellow metal will get a boost with the RBI wrapping up half the total quantity offered by IMF,” he added. (Related report on Page 6)

More Stories on : Gold & Silver | RBI & Other Central Banks

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