Gold prices continued to rise on Wednesday extending the all-time highs which followed India’s central bank bought 200 tonnes of the precious metal, swapping dollars for bullion as the country’s finance minister warned the economies of the US and Europe had “collapsed”.
India’s decision to exchange $6.7bn for gold equivalent to 8 per cent of world annual mine production sent the strongest signal yet that Asian countries were moving away from the US currency.
The purchase by New Delhi’s Reserve Bank from the International Monetary Fund pushed gold prices to a record $1,090.90 per troy ounce, up 2.6 per cent on the day, as traders bet that other central banks would also become buyers.
Pranab Mukherjee, India’s finance minister, said the acquisition reflected the power of an economy that laid claim to the fifth-largest global foreign reserves: “We have money to buy gold. We have enough foreign exchange reserves.”
He contrasted India’s strength with weakness elsewhere: “Europe collapsed and North America collapsed.”
“This is a landmark trade,” said Jonathan Spall a director at Barclays Capital and a gold specialist. “Central banks are conservative institutions and India’s move is a sign for other central banks and sovereign wealth funds that were contemplating buying gold.”
New Delhi’s acquisition came months after China revealed it had almost doubled its gold reserves in the past six years.
Gold: Unstable metal
Interactive timeline charts economic and political events that have driven gold prices from 1900
Traders and mining executives tipped China, Saudi Arabia and Middle Eastern sovereign wealth funds as candidates to snap up the rest of the gold the IMF plans to sell.
