Capital Gold Group Report: Did India sell US Treasury bills to buy IMF gold?

2009-11-08 06:40:00

MUMBAI (Commodity Online): With the Indian central
bank Reserve bank of India buying 200 tonnes of IMF gold at $6.7
billion, speculation is rife that the bank must have sold US Treasuries
bills to grab the yellow metals.

According to a report appeared
in the Economic Times, India’s leading business daily, The RBI may have
sold US Treasuries to fund its gold purchase from the International
Monetary Fund.

This purchase suggests that the Indian monetary
authorities are seeking to change the composition of their foreign
reserve holdings, most likely diversifying away from US Treasury
securities, the report said.

The move was prudent as India needed liquid assets as a buffer against sudden, destabilising capital outflows.

The
central bank has, however, refrained from disclosing the details of the
transaction in its weekly statistical supplement released on Friday.

According
to the RBI release, total foreign exchange reserves including gold and
SDR (special drawing rights —the reserve currency with IMF) dipped by
$1.129 billion to $284.4 billion during the week ended October 30.
While foreign currency assets dipped by $1.580 billion, the value of
SDR dipped $25 million. The value of gold in reserves rose $484 million
to $10.8 billion.

Going by the current composition of reserves
comprising various foreign currency assets, SDR, gold and reserves with
the IMF, gold which is valued at the month-end bullion prices at the
London bullion exchange has for long hovered around $10 billion and
roughly accounts for 4% of the total reserves.

Had last week’s
purchase been reflected in the latest reserves figures, the value of
gold would have gone up by at least 50%. One would also know how the
central bank has funded this purchase. According to an RBI official,
the purchase was out of the foreign currency assets and not SDR, the
report said.

Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA
gold

Read more….