As reported by Bloomberg.com, India bought 200 metric tons of gold valued at $6.7 billion from the International Monetary Fund on November 3rd, 2009.  That gold purchase cleared out just under half of what the IMF was offering for sale; consequently the IMF is still offering another 203 metric tons for sale.  India proclaimed that the purchase was due to their fear of a collapsing dollar and their desire to hedge their foreign currency reserves.

The first purchase by India at $1,045 per ounce occurred over a two week period and made an impact on the value of gold which rose to over $1,190 per ounce just before the Thanksgiving holiday.  Since the first purchase India has realized an $800 million profit.  What is most significant is that India is currently in negotiations on the other half that the IMF is offering.  A second purchase could push gold prices much higher in the near future.

This recent purchase by India highlights the recent shift of foreign central banks from net sellers of gold to net buyers of gold, which will likely continue.  The average country has 10% of their foreign reserves in gold, China only has 2%. If China were to purchase the other half it is speculated by David Rosenberg, chief economist and strategist with Gluskin Sheff & Associates Inc, that gold would rise to $1,300 per ounce.

It is likely that we will hear very soon as to which country will purchase the second half of the gold offered by the IMF and when we do watch for new record gold prices to be set.