The Bank Of India Buys 200 Metric Tonnes Of Gold From IMF

by Yuliya Talmazan | November 4, 2009 at 10:48 am

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The Reserve Bank of India (RBI) has purchased 200 metric tonnes of gold from International Monetary Fund to diversify its assets on Monday. Analysts say weak American dollar is the major reason for RBI to stock on gold right now. The deal came at a price of $6.8 billion ($1,045/ ounce). IMF says it still has 203.3 tonnes of gold remaining for sale. China has allegedly expressed interest in converting its foreign exchange reserve into gold.

The demand for gold has always been an important indicator of the state of economy. In turbulent times, people opt out from stocks and shares, preferring to invest in more tangible assets, the embodiment of which has always been gold. Moreover, India is the world's biggest gold consumer. As of November 2009, one tonne of gold traded for US $35 million. Currently, USA, Germany and France hold the most gold reserves in the world.

"A weaker dollar could diminish the value of India's foreign exchange reserves and hence this could lead to further accumulation of gold by the RBI. This move will help India's central bank to hedge its downside risk on the foreign exchange reserves front," Angel Commodities Broking analyst Amar Singh said.

"We feel the RBI could move forward to accumulating more reserves as gold is expected to shine for years to come. The Dollar Index has weakened sharply and at the same time gold prices have gained phenomenally," Singh said. "

The price of gold has surged in the wake of the RBI deal. Gold was trading at above $1088/ounce today. Immediately after the news of the RBI purchase broke, gold soared to as much as $1093.10/ounce.

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