Alot of speculation right now. Some say China, some say India.

I think its generally agreed that someone will buy it, which is probably the opposite of the effect they wanted by announcing the sale, ONE MORE TIME.

IMF gold purchase not feasible for China: CGA

BEIJING, Feb 24 (Commodity Online): China Gold Association (CGA) said Tuesday it is not feasible for China to buy the IMF bullion, as any purchase or even intent to do so would trigger market speculation and volatility.

Instead the Association said the country would continue to shore up its gold reserves by acquiring gold mines abroad rather than purchases on the international market.

Reports earlier said China is a frontline runner to buy International Monetary Fund’s remaining 191.3 tonnes of gold which is up for sale.

The IMF said last week that it would expand its bullion sales to the open market. Central banks from India, Mauritius and Sri Lanka had purchased 212 tonnes of the yellow metal from the institution last year.

Analysts said China would not hike its gold reserves given the limited quantity available on the market as gold is only a small portion of the nation’s reserves.

According to China’s State Administration of Foreign Exchange, the country held nearly 1,054 tonnes of gold reserves as of April last year, a value that equals 1.2 per cent of the nation’s gross domestic product, but still far below the world average of 10 per cent.

Gold gained 24 per cent last year after hitting a record high of $1,227.50 an ounce in December as a weaker dollar boosted demand for it as an alternative investment.

China has been the world’s largest gold producer since 2007 and closing in on India as the world’s top gold consumer.

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UPDATE

China To Purchase Half of IMF’s Gold

China has confirmed the intention to purchase 191.3 tons of gold from the International Monetary Fund at an open auction, Finmarket news agency said.

World central banks started to increase their gold reserves after prices on gold began to climb in 2001. The IMF sells gold within the scope of a program to diversify sources of income and achieve an increase in lending.

The IMF announced an intention to sell 403.3 tons of gold in accordance with the adequate decision made by the board of directors of the fund in September of 2009. India, Mauritius and Sri Lanka purchased about 212 tons of the amount at the end of 2009. India purchased most – 200 tons.

China’s interest in international trade is connected with the development of the nation’s economy, as well as with the growing consumer demand in the country.

“Chinese officials have confirmed previous announcements from IMF experts and said that the purchasing of 191 tons of gold would not exert negative influence on the world market. China is interested in the development of the domestic consumer market,” the agency reports.

Most of Chinese citizens believe that investing in gold jewelry is a good way to avoid inflation, Rough & Polished agency said.

The IMF has received the profit of $7.2 billion from gold sales. A part of the funds is to be used for crediting poor countries.

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UPDATE

India seen as potential buyer for IMF gold

* India’s gold holdings still lag other major economies

* India may seek to diversify reserves, gold seen a safe bet

* Closely watches gold prices for buying opportunities

By Abhijit Neogy and Suvashree Dey Choudhury

NEW DELHI/MUMBAI, Feb 24 (Reuters) – India’s central bank, which has increased its gold holdings to diversify its reserves, looks set to be a buyer again when the International Monetary Fund begins selling 191.3 tonnes of the precious metal amid volatility in major currencies.

The uncertain outlook for two of the world’s major reserve currencies — the dollar and euro — provides a spur for central banks, including India’s, to buy gold. India’s gold holdings lag those of major economies despite a big purchase in October.

“India is no stranger to gold. They are gearing up for growth and want to recalibrate their reserves,” said Mark Pervan, senior commodities analyst at ANZ.

“They can’t lift their gold holdings from domestic output, unlike China. And they have shown an appetite to buy in the past.”

Reserve Bank of India officials declined to comment on their gold plans but some said the central bank considered gold to be a safe investment strategy.

“We are closely looking at the gold market. We buy at market prices,” an RBI official said.

The RBI adjusts its reserve portfolio on a regular basis, officials at the central bank said. None of the officials would speak on the record, given the sensitivity of the matter.

“The RBI doesn’t want to take a credit risk as there are concerns on the dollar and the euro now,” said a senior RBI official who is not directly involved in the bank’s gold purchases.

“So, despite the interest being very low, gold is a safe bet,” the official said, referring to the low returns the bank receives through custodians for lending out some its gold.

Another RBI official noted that since India’s foreign exchange reserves have not risen as the bank has not been intervening heavily in the forex market, the proportion of gold has held steady after its last purchase of the precious metal in October.

CHINA UNLIKELY TO BUY

The IMF said last Wednesday it would soon begin selling the gold in the open market in a phased manner to avoid disrupting the market.

The sale is part of an IMF programme announced last year to sell a total of 403.3 tonnes of gold, or about one-eighth of its total stock.

China, with about $1.6 trillion in reserves, is a producer of gold and is unlikely to buy the gold being offered by the IMF, the official China Daily reported on Wednesday.

“It is not feasible for China to buy the IMF bullion, as any purchase or even intent to do so would trigger market speculation and volatility,” said an unidentified official from the China Gold Association.

The RBI was the biggest buyer in the IMF gold sale last year, snapping up 200 tonnes over two weeks and boosting its holdings to 10th largest among central banks.

“In the second tranche also it is possible they may bid for it. This is an opportunity for diversification of reserves,” said A. Prasanna, economist at ICICI Securities Primary Dealership.

The IMF’s announcement that it would sell more gold, which was expected, comes amid renewed doubts about the pace of global economic recovery and sovereign debt problems faced by a number of European nations, most notably Greece.

GOLD CONSOLIDATING

Gold prices XAU= climbed steadily late last year to touch an all-time high of $1,226.10 an ounce on Dec. 3 after the RBI announced in November it had purchased 200 tonnes of IMF gold.

Prices have steadied just above $1,000 recently, edging up to $1,107.30 an ounce on Wednesday, after falling 1 percent the previous day.

The RBI’s gold holdings rose to $18.1 billion, or 6.46 percent, of total reserves on Feb. 12, weekly data show. Its holdings on Oct. 30 were $10.8 billion or 3.80 percent, which did not include the IMF gold buy.

The average for central bank gold holdings as a share of overall reserves is 24.5 percent, ANZ’s Pervan said. Excluding Europe and United States, the average is 12 percent, he said.

For a graphic of top 10 gold holders by country, click: here

Greece’s debt woes have weighed on the euro while a slow recovery in the United States has kept the dollar out of favour.

The euro touched a nine-month low on Feb. 12, and has shed 10 percent since the end of 2009 amid worries over whether Greece could service its debt mounted. The euro EUR= remained subdued on Wednesday, holding just above $1.35. (Additional reporting by Nick Trevethan in Singapore and Ruchira Singh in New Delhi; Editing by Tony Munroe and Ramthan Hussain)

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