The IMF had slated the sell off of some gold for about a year now, although I can't remember the reason. Gold is getting a bunch of attention right now because it's a commodity, a hedge against inflation, and these are historic economic times. However, there is a problem with gold. It's heavy. People don't want to carry or trade it. It can go out of fashion just as rapidly as it's rising. Next year the Fed will begin raising rates and the dollar will regain strength, taking some momentum off gold. Betting against the dollar is betting against the future of the U.S. economy, and Warren Buffet made his stand clear on that yesterday. I expect gold to continue to be up though, as the dollar and economy are in for less-than-stellar performance for several years in my estimation.
Usually, when someone puts up that much quantity of commodity for sale, you expect a drop in price. But here the opposite has happened. Shows how weak the dollar is. What makes a government like India's which has its own huge budget deficits buy that much gold when it is trading at over $1,000 in a single transaction?<p>Peter Schiff's response here: <a href="http://www.youtube.com/watch?v=Aicc3siQiHQ" rel="nofollow">http://www.youtube.com/watch?v=Aicc3siQiHQ</a>
Fun fact: generally when you buy shiny things from the IMF, you pay through SDRs-- a bucket of currencies.<p>India this time used hard dollars to buy the gold, a very large and very interesting data point.
Simple reason - dilute/diversify your USD holdings.<p>Its pretty well known that the Chinese and Indian Banks hold one of the largest USD reserves in the world and have been responsible for artificially inflating the price of the USD , this has been going on for years.<p>China last year or probably earlier this year said "We would like another currency other than the USD to be the World's Reserve Currency".