IMF says it got 'good price' for gold from India

The International Monetary Fund (IMF), which sold 200 tonnes of gold for about $6.7 billion to the Reserve Bank of India (RBI), today said it got a “good price,” and wants to be similarly “lucky” in the next sale.

The sale price of gold to the RBI is expected to be under $1,045 per ounce, nearly $200 per ounce higher than what it would have been anticipated in mid-September, a senior IMF official told reporters in a teleconference.

When the IMF Executive Board at its meeting on September 18 announced to sell 403.3 tonnes of gold — one-eighth of the Fund’s total holding –- the prevailing market price of the bullion at that time was about $850 an ounce. “Obviously, it’s a good price relative to the original assumptions,” the IMF official said.

The IMF, in pursuance of the decisions taken at the G-20 summit, had decided to sell about 403.3 tonnes of gold to shore up its finances so that it can lend money to the poor countries at concessional rates.

“Of course, this is only half the sale that we have completed, so we don’t want to get ahead of ourselves. We still have another half to go. I hope we’ll still be lucky,” he said.

The official said the good price received for its gold from India would certainly help the multilateral lending agency to meet its target of stepping up financing to poor countries.

Meanwhile, market reports said the gold price jumped $30 per ounce in a day to reach an all-time high of $1,087 per ounce yesterday, thus giving the RBI an instant profit of $42 per ounce of gold it bought from the IMF at an average rate of about $1,045 per ounce over a two weeks period.

“Well, given its size, I think both from the Fund’s point of view and also the RBI, this was a really to give some protection against short-term fluctuations in the price,” the official said when asked about the reason for sale of gold over a two-week period.

“Obviously, this is an off-market sale, but we do it based on the price prevailing on the day. The price can fluctuate up and down for various reasons on a day-to-day basis. So we felt it would give some protection against short-term fluctuations to do it on a phased basis over two weeks, rather than just all at the price prevailing on one day,” the official said, defending the decision.

The RBI, which pledged gold during 1991 crisis with the Bank of England, yesterday announced that it had purchased 200 tonnes of gold from IMF over a two week period during October 19-30, 2009.

When asked if the next round of sale of its gold would be through the market, the IMF official said, “This depends whether there’s further interest from the official sector. If not, we would still proceed as we have planned previously.”

The IMF Board at its meeting had approved two broad modalities for the gold sale. One was direct off-market sales to official purchasers, if there was interest from official buyers and the second was on-market sales.