The World Gold Council is seeing an increasing number of apex banking authorities of nations purchasing gold to build up reserves. Last week it was the Reserve Bank of India buying 200 tonnes from the International Monetary Fund (IMF) and now the Central Bank of Sri Lanka has announced buying gold to diversify its reserves. In April 2009, the China’s State Administration of Foreign Exchange (SAFE) had announced that country’s gold reserves had risen from 600 tonnes in 2003 to 1,054 tonnes.

Aram Shishmanian, Chief Executive Officer, World Gold Council, said: “Over the past year central banks, which have been net sellers of gold are now a new and increasingly important source of demand. This latest announcement demonstrates that many central banks are reassessing their reserve asset management policies, both in traditional “over weighted” countries, as well as the key Asian central banks.

As the dollar continues to weaken and central bankers around the world realise the continuing importance of gold in providing economic stability, the confidence that an allocation to gold increases the risk-weighted returns of their reserve asset portfolios will increase. We believe more central banks in Asia and beyond will now announce increased allocations to gold.”

The IMF had sold 200 tonnes of gold to the Reserve Bank of India last week, an amount which is almost half of the total sales volume of 403.3 tonnes approved by the IMF in September 2009. The transaction represents an important step in the IMF’s limited gold sales programme designed to help put the Fund’s finances on a sound long-term footing and enable it to step up concessional lending to the world’s poorest countries.