UPDATE 6-IMF opens up 191.3 T gold sale to wider market

* IMF to sell 191.3 T of gold remaining in disposal plan

* Move prompts questions on strength of central bank demand

* IMF may approach Asian cenbanks-dealers

(Releads, adds detail, quotes)

By Lewa Pardomuan and Lesley Wroughton

SINGAPORE/WASHINGTON, Feb 18 (BestGrowthStock) – The International
Monetary Fund said it will soon begin phased sales of 191.3
tonnes of gold to the open market, a move that has called into
question demand for bullion from official sector buyers.

Gold prices fell some 1 percent after Wednesday’s news, with
some analysts saying the open market element signalled that
demand from central banks — a key fundamental driver — was not
as robust as first thought.

However, prices later stabilised above $1,100 per ounce
(GOL/: ). Commodity-related currencies came under pressure — the
Australian dollar (AUD=D4: ) was down 0.3 percent at $0.8970 and
the New Zealand dollar (NZD=D4: ) down 0.4 percent at $0.7003.

The Fund said the sales, which are part of a programme
launched last year to boost IMF resources for lending, “will be
conducted in a phased manner over time” to avoid disruptions to
the gold market.

It also left the door open for central banks to keep buying
gold directly from it, nearly four months after India’s purchase
of 200 tonnes boosted the country’s gold holdings to the 10th
largest among central banks.

“We are still open to off-market sales, so that window has
not closed,” IMF Finance Director Andrew Tweedie said, adding:
“All that has happened now is that we are moving to also start
on-market sales.”

Tweedie said a key element of the on-market sales was that
they would be carefully phased over time. “This is the practice
that other central banks have followed successfully, and we plan
to adopt a similar approach,” he added.

The move to open up sales to the wider market shook views on
the appetite for bullion from central banks.

“The question now is obviously, are current (price) levels
attractive for such a large quantity of sales?” said Saxo Bank
senior manager Ole Hansen.

“Demand has to come from the investment side, and obviously
one is primarily thinking about the central banks. They fact it
hasn’t been taken up in the period since we saw India buying
last year is putting a bit of nervousness into the market.”

The IMF last year began selling a pre-announced 403.3 tonnes
of gold, about one-eighth of its total stock, to diversify its
sources of income and increase low-cost lending to poor.
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^ For a graphic on top 10 country holders of gold, click:
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For a graphic on gold’s performance in U.S. dollar and euro,
click:
http://graphics.thomsonreuters.com/gfx/LEWA_20101802114750.jpg

For a graphic on gold price in four major currencies,
click:
http://graphics.thomsonreuters.com/0210/CMD_GLDPRF0210.gif
For a factbox on central banks’ divergent views on gold, click
on [ID:nN0495179]

For a factbox on surging global gold prices, click
[ID:nSP430968]
For a factbox on the top 10 country holders of gold, click
[ID:nSGE61H05F]
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FIRST COME, FIRST SERVED

Until now, the gold has only been made available to central
banks on a first-come-first-served basis. India’s purchase of
200 tonnes of gold, announced in early November, was swiftly
followed by smaller acquisitions by Sri Lanka and Mauritius.

The IMF’s Tweedie told IMF Survey publication the average
price for the three sales was a little over $1,050 an ounce,
generating about $7.2 billion in proceeds and a profit of about
$4.5 billion over the book value of the gold in the IMF’s
accounts.

With European central banks and the U.S. Federal Reserve
already major holders of gold, analysts have speculated that
further purchases are likely to come from Asian central banks.

“I will not be surprised if the Reserve Bank of India or
other Asian central banks opt for it (IMF’s gold),” said Rupa
Rege Nitsure, chief economist at Bank of Baroda in Mumbai.

“After the global financial crisis, everybody knows that
with a longer-term perspective it is not desirable to have
concentration of reserves in any one currency. Everybody is
trying to diversify.”

But Sri Lanka, one of the initial buyers, said on Thursday
it was unlikely to buy more gold from the IMF right now as the
island nation had already reached its required reserve level.
[ID:nSGE61H0AH]

“The idea that central banks may turn into net buyers of
gold this year is an important element in the psychology of the
rally. We believe this explains the slump in prices after the
IMF announcement,” said HSBC analyst James Steel in a note to
clients.

The IMF’s sales so far have been made within a newly agreed
Central Bank Gold Agreement, which limits sales by its European
central bank signatories to 400 tonnes a year and 2,000 tonnes
in total over five years beginning Sept. 27, 2009.

Stock Market Basics

(Additional reporting by Jan Harvey in London, Ellis Mnyandu
and Ruchira Singh; Editing by Sue Thomas)

UPDATE 6-IMF opens up 191.3 T gold sale to wider market