Sri Lanka bought 10 metric tons from the International Monetary Fund for about $375 million, the bank said yesterday in Washington, following India, Russia and Mauritius in the rush for gold. The metal, which typically moves inversely to the dollar, touched $1,195.13 an ounce after the U.S. currency fell to a 15-month low against six major counterparts.
“A lot of central banks want to diversify out of U.S. dollar holdings and replace them with gold,” said Ben Westmore, an analyst with National Australia Bank. “What it means is you’ve got a lot of added demand in the gold market that not many people would have expected.” China is “quite a likely” buyer of the IMF’s gold in the coming weeks, he added.
Gold for immediate delivery traded at $1,193.90 an ounce at 1:17 p.m. Singapore time, compared with yesterday’s close of $1,191.80. February-delivery gold rose 0.5 percent to $1,194.80 after climbing to a record $1,196.80 on the New York Mercantile Exchange’s Comex division. The Reuters Jefferies CRB Index of 19 commodities gained the most in more than a week yesterday.
Sri Lanka’s purchase, announced yesterday, followed a Financial Chronicle report that India, the world’s largest consumer, may add to a 200 ton purchase it made last month from the IMF. Reserve Bank of India Governor Duvvuri Subbarao declined to comment.
‘Good Time’
The transaction is part of Sri Lanka’s plan to diversify its reserves and it has been “gradually” accumulating the metal in the last seven months, Central Bank Governor Nivard Cabraal said in an interview in Singapore today.
“Gold is a good anchor and hedge to have in these volatile circumstances,” the governor said. “We think it’s a good time to buy.”
Sri Lanka’s buying was the third sale this month of IMF bullion to a central bank, after India bought the 200 tons for $6.7 billion and Mauritius purchased 2 tons for $71.7 million. The three sales leave about 190 tons remaining from the 403.3 tons the IMF announced Sept. 18 it would divest to shore up its finances.
The central banks of Russia and Sri Lanka have acquired gold recently, prompting analysts at Bank of America Merrill Lynch, Societe Generale and Barclays Capital to forecast more purchases. Governments are the biggest bullion holders.
Diversify
“The market is now convinced that many of the developing economies central banks will keep buying bullion from the International Monetary Fund in order to diversify their reserves,” Darren Heathcote, an analyst with Investec Bank Ltd., wrote in a report yesterday. Gold has risen 35 percent this year, heading for the sharpest annual increase since 1979.
Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, increased 5.49 tons to 1,127.86 metric tons as of Nov. 25, according to the company’s Web site.
The Dollar Index slid as much as 1.1 percent yesterday after Federal Reserve officials described this year’s drop in the currency as “orderly,” signaling it will tolerate a weaker greenback and fueling demand for higher-yielding assets. The index traded little changed at 74.339 today.
Data yesterday also showed U.S. consumer spending and sales of new homes climbed more than forecast while claims for jobless benefits dropped to the lowest level in a year.
“It’s a fever,” said Jonathan Barratt, an analyst with Commodity Broking Services Pty in Sydney. “The dollar index has broken through a massive support. That’s only going to add weight to the gold and commodity rally.”
The rally has pushed the 14-day relative strength index on cash gold above 70, a level viewed by investors and analysts who follow technical charts as a sign prices may fall.
Among other precious metals, platinum rose as much as 0.8 percent to $1,483.80 an ounce, the highest since Aug. 2008, before trading at $1,474.15. Palladium fell 0.3 percent to $372 an ounce and silver shed 0.5 percent to $18.76 an ounce.
Gold for June delivery gained to a fresh record of 263.86 yuan a gram and traded at 262.41 yuan a gram by 1:59 p.m. on the Shanghai Futures Exchange.
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