IMF sells 200 tonnes of gold to India

Posted 11 5 2009 7:36AM

WASHINGTON (AFP) – The International Monetary Fund announced Monday the sale of 200 tonnes of gold worth 6.7 billion dollars to India's central bank to shore up IMF finances.

The sale to India was nearly half the amount that the Fund has targeted for sale over the coming years.

The IMF said the transaction, which was in the process of being settled, involved daily sales that were phased over a two-week period during October 19-30.

Each daily sale was conducted at a price set on the basis of market prices prevailing that day, it said, in accordance with the institution's founding document.

"I strongly welcome this transaction with the Reserve Bank of India," Dominique Strauss-Kahn, the IMF managing director, said in a statement.

"This transaction is an important step toward achieving the objectives of the IMF?s limited gold sales program, which are to help put the fund?s finances on a sound long-term footing and enable us to step up much-needed concessional lending to the poorest countries."

The Washington-based IMF, which currently holds 3,217 tonnes of gold, is the third-largest official holder of the precious metal after the United States and Germany.

On September 18, its executive board approved the sale of 403.3 tonnes of gold, about one-eight of its current holdings, but assured it would do so in a way that would prevent disruption of the gold market.

Under the plan, the IMF offers to sell gold directly to central banks "or other official sector holders if there were to be interest from such holders."

If official demand were insufficient, the IMF said it could conduct the gold sales "on-market in a phased manner over time," in line with an approach already followed by central banks.

The IMF would be constrained by the overall ceilings agreed by the central banks, which started on September 27, of 400 tonnes annually for the next five years.

The IMF reiterated Monday its commitment to inform markets before any on-market sales begin.

The IMF has made gold sales a key element of its new income model aimed at lowering its dependence on lending revenue to cover expenses.

The Group of 20 key developed and developing countries, at their April summit in London, agreed the gold sales should allow the IMF to offer favorable conditions on loans to the poorest countries.