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The International Monetary Fund said on Thursday it sold 10 tonnes of gold to the central bank of Bangladesh this week, its first sale after a 10-month hiatus, as a volatile U.S. currency draws holders to bullion.
An uncertain outlook for two of the world's major reserve currencies -- the dollar and the euro -- is seen providing a spur for central banks to buy gold, which has gained as much as 15 percent this year.
The IMF transaction, at Tuesday's market prices, raised $403 million by disposing of gold that was part of 403.3 tonnes approved for sale by the IMF's executive board in September 2009.
Gold rose to a two-month high on Sept 7 -- within sight of a lifetime high around $1,264 an ounce struck in June.
"The U.S. dollar doesn't look so good in the long term. The Chinese and everbody else want to diversify their portfolio," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong. "I think the central banks on our side and the Middle East would like to buy some gold."
The sales are part of plans adopted last year to diversify the fund's sources of income and boost low-cost lending to poor countries by up to $17 billion through 2014. The Fund is the world's third-largest holder of bullion after the United States and Germany.
The IMF has already sold 212 tons of gold to the Reserve Bank of India, the Bank of Mauritius and the central bank of Sri Lanka, all in November last year. The IMF also said that at the end of July, a further 88.3 tonnes had been sold through on-market sales that it announced in February.
SALE DRAWS MARKET ATTENTION
While Thursday's sale was modest in size, it drew the attention of markets. "It's only 321,000 ounces, the equivalent of 3,000 COMEX contracts," said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC in Chicago.
"But it can, in general, indicate that the Asian central banks continue to buy and add gold into their reserves, which over the long term is a very healthy thing (for gold)."
More than 120,000 contracts traded on Thursday, making the IMF sale less than 3 percent of a relatively light trading day on the COMEX exchange in New York.
Earlier this year there were reports China was prepared to buy bullion from the IMF, though those reports were disavowed as the country, which is also the world's top gold producer, was likely to turn to domestic supply.
"They will only buy if the price is really really attractive. I don't think China will enter the market. If they are in the market, the price will jump," said Leung of Lee Cheong.
But dealers said Asian banks' interest in having gold holdings in their reserves will support gold prices and increase as the region's economic might grows.
"They prefer to buy on a break lower, but as the power continues to shift east, they continue to buy it and gold continues to head up over the long term," said McGhee of Integrated Brokerage Services LLC.
In September 2009, IMF member countries formally endorsed a plan for strictly limited sales of 403.3 tonnes of gold from the fund's stockpile and said any on-market sales would be made in a way that did not disrupt gold markets.
The 19 signatories of the Central Bank Gold Agreement -- largely European central banks -- also pledged last year to cap their gold sales at 400 tonnes a year over the next five years
