By Greg Peel, FNArena News

The biggest official (central bank) holder of gold in the world is the US, with around 8,000 tonnes. Next in line is Germany with about 3.4kt, followed by the International Monetary Fund with 3.2kt. Then come France and Italy before China slips in ahead of Switzerland and Japan.

The gold “owned” by the IMF was contributed by the US and the legacy European central banks on the establishment of the Bretton Woods agreement after World War II. The agreement saw currencies pegged to the US dollar, which in turn was pegged to gold, and also saw the establishment of the IMF. The specific role of the IMF is to provide low-interest loans to poor nations suffering economic hardship. As one might imagine, demands on the IMF have leapt since the GFC hit as countries from Iceland to Pakistan stuck their hands out for assistance.

IMF membership has grown since World War II to include many more secondary and emerging economies. However voting rights are still very much biased toward the founding members, with the US firmly in control. Even before the GFC hit, the IMF had petitioned the US on several occasions to be allowed to sell some of its extensive gold holdings. The last time the IMF sold gold was in 1999 following the Asian Currency Crisis.

But each time the US refused. The reason it refused was because the IMF had become fat and lazy, building up a substantial cost base without increasing its activities to match. The Fund did not need to sell gold to fund some economic bail-out or other, it needed money to cover its expense account. The US instructed the IMF that it would only be granted permission to sell gold if and when it got its house in order. And under a new director, it did.

Which was just as well. No sooner had the new director taken up office but the GFC hit and the switchboard lit up like a Christmas tree. Again the IMF asked for permission to sell gold, and this time it was granted. Clearly the money was now needed for its intended purpose. The announcement was made earlier in the year that the IMF would sell 403t of gold, or one eighth of its holdings, and sale permission was ratified by members only last month.

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GDP: Great Day to Play

Good Day,

Friday’s market sessions in precious metals started off on a tamer note, following the best gains in gold in three weeks. Explanations follow. The recapture of the $1045 area is noteworthy, although analysts we polled during the wee hours overseas are trying to define the move as everything from a ‘one-hit wonder’ to the ‘re-ignition of what we saw during most of October.’

The Bloomberg weekly survey foresees weaker gold prices come next week - not by a large margin (57% bearish)- but still focusing on a potential comeback by the US currency, the early signs of which became visible this past Monday. Demand for the yellow metal once again slipped away in India, following signs of life during the earlier part of the week when values came close to $1025 per ounce. The country recorded its sixth straight month of declining gold imports, despite a decent gain during September – in anticipation of festival-related sales.

New York spot dealings opened with a $2.60 loss in gold bullion, which was quoted at $1043.20 bid, as against a euro-dollar seen at $1.4798 and the USD index steady-to-higher, at 76.05, with little in the way of fresh news thus far this morning. Oil prices gave back about 50 cents of their whopper-sized Thursday gains, slipping to $79.32 per barrel. Risk traders took a latte break this morning, and this gave the dollar a moment to try to re-group.

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Read the rest of Gold, Silver, Metal Prices: Commentary – 10/30/2009 (2,324 words)

Gold buying is still at high levels in India as jewellers look to stock up on the precious metal for the wedding season.
Indian weddings traditionally call for gold gifts to be made to the bride and with the festival season seen as an auspicious time to get married, purchases are still going strong in the aftermath of Diwali.
The news feeds on this site are independently provided by Adfero Limited © and do not represent the views or opinions of the World Gold Council.

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New figures have revealed that Indian gold imports surged by 72 per cent between August and September as a result of higher demand ahead of the festival season.
According to the Bombay Bullion Association, imports rose from 21.8 tonnes in August to 37.5 tonnes last month, the Economic Times reports.
The news feeds on this site are independently provided by Adfero Limited © and do not represent the views or opinions of the World Gold Council.

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Top global supplier of minerals processing and materials handling equipment, FL smidth, has won another important coal handling contract in India

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India’s Sesa Goa, a $5-billion unit of London-listed metals group Vedanta Resources, is being investigated by the Indian government for financial and other irregularities.

India’s largest iron-ore exporter said on Thursday it and its unlisted Sesa Industries (SIL) subsidiary were under investigation by the Serious Fraud Investigation Office (SFIO), and the probe had to be completed in six months.

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Sesa Goa is being investigated by the Indian government for financial and other irregularities

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The South African coal market is set to be boosted further by India’s state-owned trading firm MMTC’s tender for 12,5-million tons, Indian traders participating in the tender said.

Indian demand for South African coal has been the most important factor supporting prices at over $60/t FOB Richards Bay throughout this year.

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Marriage-related buying picks up in India

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Mark O’Byrne submits:

Gold
Gold closed Friday night trading at $1,058.70/oz. In euro and GBP terms gold is trading at €704.55/oz and £642/oz. Gold looks set for its fourth week of gains (if it can remain above $1,053/oz) and this would be bullish technically.

While fears about the Chinese economy may have led to some profit taking in gold yesterday, the news that China is now a net importer of gold and looks set to be a net importer for the foreseeable future is very favourable to gold’s medium and long term fundamentals. China imported 112 metric tonnes of gold in 2008 and the rise in net imports was driven by a significant 176% growth in investment demand for the yellow metal, which hit 68 tons, and 21% growth in jewelry demand to 326 tonnes. With gold ownership banned in mainland China for most of the 20th Century, China is now playing catch up and in time may become as important a driver of demand as India is. Per capita consumption of gold in China is a fraction of that of India but this is set to change in the coming years, especially as the Chinese government is encouraging its citizens to save in gold and silver bullion on state television in order to foster a culture of saving and contain domestic inflation. Chinese savers now have access to gold-linked checking accounts.

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