Bangladesh Boosts Gold Reserves

Source:

"The IMF still has another 93 tons to sell."

Bangladesh is the latest nation to increase its official gold reserves, buying 10 tons of bullion—worth about US$400M—from the IMF.

The move highlights revived interest in PMs from central banks (CBs) and sovereign wealth funds, reversing the trend for large gold disposals of the late 1990s and early 2000s.

Analysts and CBs forecast that the official sector, a group including central banks, sovereign wealth funds and other government agencies, would be net buyers of gold this year for the first time in more than 20 years.

The shift in CBs' attitudes toward gold is important on two fronts: the fresh interest provides psychological support and, more importantly, slower sales reduce supply sources and help boost prices. GFMS estimates CBs last year sold 41 tons of gold, down 82% from 2008 and the lowest level in 20 years.

The IMF sold gold to Bangladesh at market prevailing prices on September 7. Gold was quoted on the London afternoon fix at US$1,256.75/oz. that day.

Gold prices hit a nominal all-time high of US$1,264.90/oz. in mid-June. However, in real terms, adjusted for inflation, gold is still well below its record of more than US$2,000 set in the early 1980s.

The transaction was part of the total sales of 403.3 metric tons approved in September 2009. "It adds to the total sales to official holders of 212 metric tons made to the Reserve Bank of India, the Bank of Mauritius and the Central Bank of Sri Lanka," the IMF said.

Besides off-market sales to official institutions, the IMF has sold gold to commercial entities through on-market transactions. Since the on-market sales started in February, the multilateral organization has sold 88.3 tons.

After the sale to Bangladesh, the IMF has another 93 tons to sell. At the current pace of about 15–17 tons a month, it could end by Q111.

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