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Gold prices surge as India buys IMF reserves

Source: The Guardian

Nov 04, 2009

Summary

• Gold hits new high on International Monetary Fund sale
• India diversifies reserves as dollar continues to weaken

Gold prices surged to a new high of $1095.05 an ounce this morning following the news that India has purchased $6.7bn (£4.05bn) of gold from the International Monetary Fund.

Yesterday the IMF announced it had sold 200 tonnes of gold to the Reserve Bank of India over the past two weeks. Traders reported that the huge sale had intensified interest in gold, which has now risen by almost 23% this year.

India said it was keen to diversify its reserves away from the US dollar, which has weakened in recent months.

Pranab Mukherjee, India's finance minister, said: "We have money to buy gold. We have enough foreign exchange reserves."

Erik Nilsson, senior economist at Scotia Capital, said the deal was "certainly indicative that the monetary authorities in India are not overwhelmingly upbeat about the outlook for the US dollar".

The dollar has lost 6.5% of its value in the last five months, measured against a basket of other currencies. This has helped to push u

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