Nov. 3 (Bloomberg) -- The International Monetary Fund sold200 metric tons of gold to the Reserve Bank of India for about$6.7 billion, its first such sale in nine years.

The transaction, equivalent to 8 percent of global annualmine production, involved daily sales from Oct. 19-30 at marketprices and is in the process of being settled, the IMF said in astatement yesterday. The average price to India, the biggestconsumer, was about $1,045 an ounce, an IMF official said on aconference call. Gold for immediate delivery gained 0.2 percent.

“The fall in the U.S. dollar seems to be pushing all thecentral banks to strengthen their portfolio with gold,” saidN.R. Bhanumurthy, professor at the National Institute of PublicFinance and Policy in New Delhi. “Gold is a safe store of valuecompared to the U.S. dollar.”

The IMF sale accounts for almost half the 403.3 tons thatthe Washington-based lender in September agreed to sell as partof a plan to shore up its finances and lend at reduced rates tolow-income countries. Asian nations, which have amassedstockpiles of foreign currency reserves since the 1998 financialcrisis, have shown increased interest in diversifying out of U.S.assets as the dollar loses value against other currencies.

Gold for immediate delivery gained to $1,061.60 an ounce at3:42 p.m. in Singapore and was about $9 below its record$1,070.80 an ounce reached Oct. 14.

Concession Lending

“The most important thing is that people want gold even atthese prices,” said Ghee Peh, head of mining research, with UBSAG in Hong Kong. “There’s good support for prices for now”from the IMF’s disposal of bullion, he said.

Proceeds from the sales and other IMF resources as well asindividual contributors would help pay for discounted interestrates on loans to low-income countries, the IMF said in July. Itplans to grant as much as $17 billion in extra loans to poornations through 2014. The 403.3 tons the IMF agreed to sellamount to one-eighth of its stockpile.

“This transaction is an important step toward achievingthe objectives of the IMF’s limited gold sales program, whichare to help put the fund’s finances on a sound long-term footingand enable us to step up much-needed concession lending to thepoorest countries,” IMF Managing Director Dominique Strauss-Kahn said in an e-mailed statement.

Reserve Management

The gold purchase was done as part of Reserve Bank’sforeign exchange reserves management operations, the centralbank said in a statement on its Web site today.

India’s foreign-exchange reserves advanced $684 million to$285.5 billion in the week ended Oct. 23, the central bank saidOct. 30. That included foreign-currency assets of $268.3 billion,gold reserves of $10.3 billion and the special drawing rightswith the IMF.

“There seems to be consensus among the central banks thatit’s better to cut down on currency holdings and diversify intoassets like gold, which has upside potential,” Krishna Reddy, aprecious metal analyst at Way2Wealth Commodities Pvt. said inMumbai. “The Reserve Bank of India gold purchase is a clearreflection of this belief.”

China, the world’s biggest gold producer, has increasedreserves of the metal by 76 percent to 1,054 tons since 2003 andhas the fifth-biggest holdings by country, Hu Xiaolian, head ofthe State Administration of Foreign Exchange, said in April.

The nation may purchase some of the 403.3 tons of goldbeing offered by the IMF, Market News International reported inSeptember, citing two unidentified government officials.

More Sales

The lender has said it is ready to sell directly to centralbanks and later make transactions on the open market ifnecessary. The IMF official declined to say yesterday whetherother central banks have expressed interest in purchases.

The IMF, which helped shore up economies from Pakistan toIceland over the past year, has sold gold on several occasions.The last transaction was authorized in December 1999 and tookplace off-market between then and April 2000.

“Gold production has been declining for the past sevenyears, while demand, particularly the investment demand has beengrowing steadily,” Way2Wealth’s Reddy said. “Central banks andeven ordinary investors want to own more gold.”

To contact the reporters on this story:Sandrine Rastello in Washington at srastello@bloomberg.net;Kyoungwha Kim in Singapore at Kkim19@bloomberg.net.

Last Updated: November 3, 2009 02:59 EST

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