Gold jumped on Thursday as investors shunned paper currencies and piled into gold, while the market shrugged off dollar moves and news that the IMF would sell gold in the open market. Spot gold was bid at $1,120.55 an ounce at 1604 GMT, against $1,106.00 late in New York on Wednesday when it touched a one-month high of $1,126.85 an ounce.
-- Investors shun paper currencies, pile into gold
After New York opened persistent buying pushed the precious metal up to a session high of $1,123.30 an ounce from an earlier low of $1,097.80 seen as the market reacted to the IMF news. "Some people who didn't want to be in dollars, now don't want to be in euros or yen, they don't want currencies," said David Thurtell, analyst at Citi. "Gold is something you can get your teeth into." Greece's deteriorating public finances and worries about sovereign default have hit the euro in recent weeks.
Investors around the world have become more interested in gold - seen in the price of gold in euro terms, which earlier hit a record high of 824.27 euros an ounce. "The move is part of the ongoing transformation of gold from commodity to currency ... people don't want to do paper," a London-based trader said.
Gold is used as a hedge against financial turbulence and inflation. It traditionally has an inverse relationship with gold - they move in opposite directions. The IMF said it would sell 191.3 tonnes of gold to the open market under a programme approved last year to boost its resources for lending, a move that has called into question demand for bullion from official sector buyers. "The news isn't bullish, but the overall impact on gold should be limited," De Wet said. "They are not going to dump it on the market ... If gold prices come off we might see central bank interest return."
The fund said the sales, which are part of a programme launched last year to boost IMF resources for lending, will be conducted in a phased manner over time to avoid disruptions. It also left the door open for central banks to keep buying gold directly from it, nearly four months after India's purchase of 200 tonnes boosted the country's gold holdings to the 10th largest among central banks.
Sri Lanka's central bank governor said his bank was unlikely to buy more gold from the IMF right now as the island nation has already reached its required reserve level. Among other precious metals, silver was bid at $16.19 an ounce against $15.84, platinum at $1,528.50 an ounce against $1,524.50 and palladium at $436 from $433.50.
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