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India Dumps Dollars – Buys Gold

4 November 2009 819 views One CommentEmail This Post Email This Post

India_buys_gold_pranab_mukherjee_gold_priceGold hit another all-time high yesterday of $1,885/ounce. This $30 surge happend on news that India bought 200 tons of gold from the IMF. This represents the largest purchase of gold by India in over 30 years. It looks like India is joining China in a rush to diversify away from the Dollar. India paid an average price of $1,045/oz to the IMF in Dollars – a $7 Billion transaction. 

It’s widely believed that China, Russia or Brazil will buy the remaining 200 tons of gold for sale by the IMF.

India had about $285 Billion in gold and currency reserves, with gold making only 3.7% of this. Fifteen years ago, gold was nearly 21% of the reserves. Even with this purchase, the total gold amount is only 6.7%, quite a small amount by historical standards.

A senior official of the central bank told WSJ, “It makes sense to buy gold as it will appreciate more than the U.S. dollar.”

An analyst with Normal Bang Commodities in Mumbai said that the Reserve Bank of India is still a buyer of gold at these prices – this means theres a strong chance that gold prices are likely to move higher.

I wonder, how do you ship 200 tons of gold? Maybe they’re sent as  10 oz gold bars.

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One Comment »

  • Gold Breaks $1,100: Does It Matter? | Stocks and Sectors said:

    [...] settling just under that number. Apparently the Indian government decided to sell US dollars and make a 200 ton gold purchase from the IMF, which created the spike in gold prices. Right now, the spot price for the yellow [...]

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