India Plans To Buy More Gold from IMF
Source: Financial Chronicle (11/25/09)
". . .a cool gain of $800 million for Reserve Bank of India."
A government official said that the additional purchase would depend on the "successful pitching by RBI." "RBI is an independent body, and the government does not interfere in its affairs. It will get the gold if its bid is successful and at the price it has offered."
Responding to query from FC, an IMF spokesperson said the gold sale process was still under way and "there is no fixed timetable for completing the sale. . ."
RBI has good reasons to further enrich its gold reserves. In just three weeks it has been able to benefit by as much as $800 million on the investment of $6.7 billion it made in buying 200 tons from IMF.
Since 1999 RBI has been periodically valuing its gold reserves at "prices close to the market." It has not done so since it purchased the gold from IMF.
RBI bought the 200 tons at $1,045 an ounce. The transaction, from IMF to RBI, involved daily sales that were staggered over a two-week period, October 19–30, with each daily sale conducted at a price set on the basis of that day's market price.
On Tuesday, gold prices stood at $1,168, an increase of 12% over the price RBI paid. The market value of the gold, as of Tuesday, thus stood at $7.5 billion—indicating a cool gain of $800 million for RBI.
RBI holds its Forex reserves in a basket of currencies expressed in dollar terms. It is able to earn only a nominal return on the dollar reserves.