By Russell Glaser – A big fish has just entered into the gold market; the Reserve Bank of India. Yesterday India’s national bank purchased 200 metric tons of gold from the IMF. The major transaction helped to drive the price of the commodity to a new record high.
While it was known the IMF was shopping 403.3 metric tons of gold on the open market, it was not expected that a national bank would take such a large percentage of the sale. The enormous bulk purchase is viewed as a reduction in the supply of gold in the market as the Reserve Bank of India is expected to hold the gold in its long term reserves. Speculation is now building for other national banks to begin stocking up on the commodity. This move may be a way of national banks to add a bit of diversification to their holding as the dollar continues to weaken against a basket of currencies. The dollar is considered the main holding for a nation’s currency reserves.
Yesterday’s large purchase helped push the price spot gold through its resistance level of $1070 and the commodity is now trading at a record high, approaching the $1100 price level. Perhaps China, the world’s largest holder of U.S. Treasury Bonds will be the next major central bank to move away from the dollar and diversify with gold, fueling more demand for the commodity and pushing the price higher.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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