Sri Lanka’s Central Bank (CB) and the International Monetary Fund (IMF), which has in recent times had a lender-borrower relationship, on Thursday confirmed a gold trade between the two.
The CB purchased 10 metric tons of gold at a market price of $375 million on Monday from the IMF, the two institutions confirmed in separate statements. The IMF said this transaction is part of the total sales of 403.3 metric tons approved by its Executive Board earlier this month and adds to the total of 202 metric tons already sold to the Reserve Bank of India and the Bank of Mauritius.
In its statement, Sri Lanka’s CB said the gold purchases which has been made over the past several months is part of the diversification of the external assets portfolio of the bank into various safe financial instruments. “Gold is one of the commodities which provides an anchor for long term stability of reserve assets,” it said in a statement which also added that the gross official reserves of Sri Lanka now exceed $5.2 billion, which is sufficient to finance 6.4 months of imports.
A Bloomberg news agency report on Thursday said gold prices fell from record highs in London as strong dollar prompted investors to sell the metal.
The report also referred to Sri Lanka’s gold purchase which followed a news report that India may add to the 200 tons it bought last month for $6.7 billion from the IMF.
The IMF has about 190 tons remaining and China is “quite a likely” buyer in coming weeks, an analyst was quoted as saying by Bloomberg.
“A lot of central banks want to diversify out of U.S. dollar holdings and replace them with gold,” he said. “You’ve got a lot of added demand that not many people would have expected.”