IMF Gold Sale: China Not a Viable Buyer-WGC


"India then becomes a very logical candidate. . ."

People who believed China would be the buyer of the IMF's 191.3 tons of gold hadn't really thought it through, said George Milling-Stanley, head of government affairs for the World Gold Council (WGC).

The WGC announced yesterday that the IMF sold 5.6 tons of gold in February on the open market. The IMF began its planned sale of 403.3 tons of gold last year; it has a further 185.7 tons of gold to sell. Many speculated that after India's central bank (CB) bought 200 tons of the IMF's gold last November; China would be next in line.

"China has been buying local gold mine production and the production of local refineries—whether that is byproduct gold or recycled gold—for a number of years," said Stanley. "They have been gradually building gold reserves—not by cashing in dollar assets, which might upset the dollar market, but they have been quietly doing it by buying local gold production," he said. However, he explained that the fact China didn't buy any gold from the IMF doesn't say anything about China's views on gold.

This is something that a number of countries are doing as well, said Stanley. "Russia has been doing it for 20 years, as well as Venezuela and the Philippines. . ."

"So China, I don't think was never really a logical candidate," said Stanley from the New York head office. "Once you exclude those CBs that have been building reserves in this manner, then you start to look for the next logical candidate," he said.

Stanley thinks this candidate has large and growing dollar balances, belief that the dollar is not yet set to soar and no local gold mining industry. "India then becomes a very logical candidate and they took half of what the IMF had available back in November, then Sri Lanka and Mauritius followed in example in a smaller way."

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