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Mauritius buys 2 tons of gold from IMF

Section: Daily Dispatches

By Sandrine Rastello and Kim Kyoungwha
Bloomberg News
Tuesday, November 17, 2009

Mauritius followed India buying gold from the International Monetary Fund, prompting renewed speculation that other central banks will bolster their holdings as the precious metal trades near a record and the dollar slumps.

The Bank of Mauritius bought 2 metric tons for about $71.7 million, said the Washington-based agency, which plans to sell a total of 403.3 tons to shore up its finances. The Reserve Bank of India paid $6.7 billion for 200 tons earlier this month.

Gold has surged 29 percent this year as the dollar declines and investors seek to protect their wealth. Evy Hambro, who helps to manage BlackRock Investment Management Ltd.'s $11.6 billion World Mining Fund, said yesterday there will be renewed interest in gold from holders of reserves.

The purchase is "another signal that emerging-market central banks are looking to increase their foreign-exchange allocation in gold," said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd. Calls by Bloomberg News to Mauritius’s central bank went unanswered this morning.

Gold for immediate delivery, headed for a ninth annual gain, touched an all-time high of $1,143.60 an ounce yesterday. The metal, which traded at $1,137.54 at 10:48 a.m. in Singapore, had become the "ultimate currency," Gijsbert Groenewegen, a partner at Gold Arrow Capital Management in New York, said yesterday.

The sale to Mauritius was based on market prices on Nov. 11, the IMF said in an e-mailed statement yesterday. Spot gold traded between $1,105.66 and $1,118.88 an ounce that day, according to Bloomberg data. The IMF has said it is ready to sell directly to central banks and later make transactions on the open market if necessary.

"There are a lot of uncertainties in the U.S. dollar and not much confidence in other currencies either," AMP Capital Investors's Oliver said from Sydney. "Gold is a viable option."

The Dollar Index, a six-currency gauge of the dollar’s value, was little changed today near a 15-month low.

Asian nations, which have amassed stockpiles of foreign currency reserves since the 1998 financial crisis, have shown increased interest in diversifying out of U.S. assets.

The Federal Reserve has cut borrowing costs to an all-time low while the U.S. government boosted spending to a record to combat recession in the world’s biggest economy, fueling speculation that the currency will be debased.

China, the biggest gold producer, has increased gold reserves 76 percent to 1,054 tons since 2003 and has the fifth-biggest holdings by country, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in April.

The world's most populous nation may buy some of the 403.3 tons being offered by the IMF, Market News International said in September, citing two unidentified government officials.

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International Monetary Fund
Press Release No. 09/413
Monday, November 16, 2009

The International Monetary Fund announced today the sale of 2 metric tons of gold to the Bank of Mauritius, the nation's central bank. The sale was conducted on the basis of market prices prevailing on November 11, 2009 with proceeds equivalent to US$71.7 million (SDR 44.7 million).

This transaction is part of the total sales of 403.3 metric tons approved by the Executive Board in September 2009 (see Press Release No. 09/310), and it adds to the 200 metric tons already sold to the Reserve Bank of India (see Press Release No. 09/381).

As previously announced (see Press Release No. 09/310), in accordance with the guiding principle of avoiding disruption of the gold market, the IMF's Executive Board adopted modalities for the gold sales consistent with guidelines it had earlier established. In particular, the Fund is standing ready for an initial period to sell gold directly to central banks and other official holders that may be interested in such sales.

Thereafter, on-market sales of any amounts remaining from the 403.3 tons would be conducted in a phased manner over time, following the approach adopted successfully by central banks participating in the Central Bank Gold Agreement.

As previously indicated, the Fund will inform markets before any on-market sales commence, and will report regularly to the public on progress with the gold sales.

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