Yesterday’s news the International Monetary Fund is planning on selling around 190 tonnes of gold weighed on commodity-linked currencies like the NZD. The associated sell off in gold prices prompted a more general slide in commodity prices, which saw NZD/USD drift lower through most of the afternoon.

Danica Hampton and Mike Jones are BNZ’s Currency Strategists. All of the research produced by the BNZ Capital team of economists is available here.

# Steve Netwriter Says:
February 19th, 2010 at 4:42 pm

“Yesterday’s news the International Monetary Fund is planning on selling around 190 tonnes of gold”

LOL

Who to? China, India or one of the other central banks ?

Maybe the RBNZ should buy some (they have none at the moment) so there’s something of value here when the currencies collapse.

Contrary to much speculation China may not buy the International Monetary Fund's (IMF) remaining 191.3 tons of gold which is up for sale as it does not want to upset the market, a top industry official told China Daily 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," said the official from the China Gold Association, on condition of anonymity.

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

Some analysts had earlier said China would purchase the IMF gold in an effort to diversify its dollar asset-dominated foreign exchange reserves. According to estimates, over 70 percent of China's $2.4 trillion foreign exchange reserves are in dollar assets.

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 tons of the yellow metal from the institution last year.

NEW DELHI/MUMBAI (Reuters) – The Reserve Bank of India, 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.