IMF sells gold to India's central bank

By HARRY DUNPHY

posted: 22 DAYS 6 HOURS AGO

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WASHINGTON -The International Monetary Fund has sold 200 metric tons of gold worth $6.7 billion to India's central bank as part of an effort to shore up IMF finances and increase low-cost lending to developing countries.

The amount represents almost half the total sales volume of 403.3 metric tons approved by the IMF in September, the lending organization said Monday, a decision anticipated for more than a year and discounted by gold markets.

China, India and Russia have indicated interest in such purchases as a way of reducing their position in dollar-denominated securities, particularly since the steep fall in the dollar's value. The purchases also serve as a way of increasing these countries' influence at the Washington-based IMF.

But analysts had expected China to become the first purchaser of IMF gold. China's foreign reserves, already the world's largest, hit a record high $2.273 trillion by the end of September, its central bank reported.

Countries with economies that are gaining strength, such as China, India and Brazil, have long complained of U.S. and European dominance at the IMF. The United States is the IMF's largest shareholder.

The head of the IMF, Dominique Strauss-Kahn, welcomed the transaction with the Reserve Bank of India.

"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," he said in a statement.

The sale took place over a two-week period that ended Oct. 30, the IMF said, with each daily sale conducted at market prices prevailing that day.

The IMF said it was ready to sell gold directly to central banks and other official holders such as development banks that may be interested in such sales.

After that, the IMF said, any amounts remaining from the 403.3 metric tons would be sold in a phased manner over time, with the lending organization informing markets before any sales begin and reporting regularly to the public on such transactions.

The 186-nation IMF, founded after World War II to monitor the global economy, is the third largest official holder of gold in the world with 3,217 metric tons after the United States and Germany.

2009-11-03 10:54:08