IMF to begin open market sale of 191.3 tonnes of gold

Last year, the IMF had decided to sell 403.3 tonnes of gold to raise money to fund poverty alleviation projects in Third World countries. The total amount remaining to be sold in this phase is 191.3 tonnes

The International Monetary Fund (IMF) on Thursday said that it will shortly begin selling gold in the open market under its gold sales programme, which was launched last year to raise more money for lending, reports PTI.

In September last year, the IMF had decided to sell 403.3 tonnes of gold to raise money to fund poverty-alleviation projects in Third World countries. The total amount remaining to be sold in this phase is 191.3 tonnes.

Until now, the IMF has sold 212 tonnes of gold, but the sale was limited to central banks. The Reserve Bank of India had purchased 200 tonnes of gold last year while Sri Lanka and Mauritius were the other purchasers.

The IMF said that the 'on-market' sales will be conducted in a phased manner over time to prevent any disruptions in the gold market.

However, the IMF said that the initiation of the on-market sales does not preclude further off-market gold sales directly to interested central banks or other official holders.

Meanwhile, in an interview to IMF Survey Magazine, IMF finance director Andrew Tweedie said that the IMF is still open to off-market sales.

"All that has happened now is that we are moving to also start on-market sales. But if central banks or other official institutions are still interested in purchasing gold directly from the IMF, and if we still have gold available, we would stand ready to conduct off-market sales," he said.

The average price for the three sales— to India, Sri Lanka and Mauritius, Mr Tweedie said, was a little over $1,050 per ounce. The sales have generated total proceeds equivalent to $7.20 billion and profits of around $4.50 billion over the book value of this gold in the IMF's accounts, he said.

"The profits will be used to create an income-generating endowment as part of the new income model that no longer relies on lending income to finance the IMF's diverse activities, and will also contribute to boosting the Fund's capacity to provide concessional loans to low-income countries," he said.

The Reserve Bank of India purchased 200 tonnes of gold, while Sri Lanka bought 10 tonnes and Mauritius bought 2 tonnes from the IMF last year.

"Because of the relatively large amount involved, it was done over a period of two weeks through a series of forward transactions. Settlement took place at the end of the period. The reason for proceeding that way was to protect both the Reserve Bank of India and the IMF from large unexpected price fluctuations that could occur on any individual day," Mt Tweedie said.


Videocon to focus more on oil and gas business

With a strong presence in the oil exploration business with oil blocks across various countries, the consumer electronics giant wants to focus more on oil and gas business

India’s consumer electronics giant Videocon group will focus more on its oil and gas business following good feedback from its properties in Brazil and Mozambique, said a senior official.

“For the investments that we have made in Brazil and Mozambique, we are getting a very good feedback, making our investments more viable. Exploration at the Australian oil blocks is also going on, but there is not much indication as to what kind of reserves can be expected,” said SM Hegde, director, Videocon group.

Mr Hegde also highlighted that in the coming years, the oil and gas segment would be one of the main focus areas for the group. “Power, telecom and oil and gas will be the main focus of the group now,” he said.

The group has a strong presence in the oil exploration business, both domestic and overseas. It is currently involved in exploration activities in various oil blocks. It has oil blocks in Australia, Brazil, Mozambique and Istanbul.

Videocon is planning to enter the oil extraction business and has received some proposals from foreign players. “We are getting some foreign proposals on the extraction side for our oil rigs,” said Mr Hegde.
The company also plans to start extraction activities in one of its Brazilian blocks by FY12. “For Brazil we are expecting extraction to start for one of the oil blocks, the Wahoo block, by next year end or by the first quarter of FY12,” he said.

Meanwhile, US-based Anadarko Petroleum Corp, the operator with about 43% paying interest in the Windjammer exploration well in the Rovuma Basin off Mozambique, said that it has reached an intermediate casing point and encountered more than 480 net feet of natural gas pay in high-quality reservoir sands, with a gross column of more than 1,200 feet. To date, this well has tested one of the seven identified play types in Anadarko’s operated acreage off Mozambique. Videocon Mozambique Rovuma 1 Ltd and BPRL Ventures Mozambique BV, a wholly-owned subsidiary of Bharat Petroleum Corp Ltd, hold an 11.75% stake each in the well.


Mutual fund outflows defy market trends

Investors have been withdrawing money virtually every month for the past 13 months—whether we are in a bull market or a bear market. This gives the lie to the fund industry’s notion that investors are merely booking profits

After the ban on entry load that came into play from 1 August 2009, outflow of money from fund schemes accelerated since most financial advisors could not get incentive to sell and service funds. Yet, industry leaders have been defending the new system publicly by arguing that the system would adjust to paying commissions, sooner than later. Industry leaders have also been trying to explain away the continuous haemorrhage of funds as ‘profit-booking’.

However, the fact is that whether the market was down or up, investors have been selling. More importantly, investors actually put in a lot more money (on a gross basis) after the recent bull-run started in May 2009. Indeed, during the May–July 2009 period, gross inflows went up along with the upswing in the stock markets.

It’s only from August 2009 that lower fresh purchases and higher redemptions started happening. The reason for that, of course, is the ban on entry load by the Securities and Exchange Board of India (SEBI) in late July.

Mutual fund houses argue that redemptions are happening because people are exiting as they come to a break-even level on their earlier investments. People who invested in mutual funds prior to the dramatic collapse in the stock markets in 2008 could not get out without taking a huge hit on their portfolios. With the markets recovering, however, investors wasted no time exiting the funds to minimise their losses or book profits, if any.

But why is it in August 2009 mutual funds saw inflows of Rs580 crore while outflows touched a huge Rs1,100 crore? The coffers of fund houses started draining from this month onwards, when net flows registered a phenomenal drop from positive flows of Rs2,000 crore in July to an outflow of Rs520 crore.

According to data available to Moneylife from a leading registrar, redemptions have far outweighed inflows into mutual funds between March 2009 and January 2010. While the Sensex has soared 68% in this period, net flows continued to remain in negative territory, except in a couple of months when new fund offerings boosted inflows.

In July 2009 and January 2010, net flows amounted to nearly Rs2,000 crore and Rs175 crore respectively, aided by robust new fund offer (NFO) purchases. In all the other months, net flows have remained in negative territory—uncorrelated to the market direction.

The only month which saw exceptional inflows was July 2009, post the announcement of the budget, when around Rs3,000 crore was pumped into mutual funds from NFOs and existing schemes.

January 2010 also witnessed record jump in both inflows and outflows. While fresh purchases amounted to nearly Rs750 crore, redemptions were in excess of Rs2,100 crore. These were the highest inflows and outflows during the period between March 2009 and January 2010. This probably indicates that while existing investors are going out, new investors are coming in, possibly through a different set of distributors such as banks.

This once again proves that fund outflows cannot be explained away by simplistic arguments such as profit-booking.




7 years ago

This is the true real fact that banning of entry load has played the most vital part in reducing AUM of MF industry-most people dont want to accept this fact because they dont have courage to admit mistakes done by them-bcos we r not in Gandhian era-when admitting mistake was considered a proud part-but the truth cannot be buried for long-it comes out with double volcanic force-whatever AMC or SEBI people might say-the fact is that no IFA is going for small ticket SIP or 5000 Rs single purchase-who will be fool to collect Rs 10 or 20 as commission to collect directly from client?may be it is viable for MR BHAVE to go and collect from client everymonth-but for poor IFA-it is never workable-the real truth behind some selling of MF is not bcos clients are willingly paying to IFA but the truth is that some part of upfront is paid by AMC's-thats the real reason for new purchases-that too inselected schemes which offer more upfront then others-this is same story of upfront paid by AMC's earlier-nothing has changed-but i am sure-people wont accept this real fact-bcos they r in 21st century-where bluff looks more polished then truth-they wud fnd many good answers to push truth behind everything-but these people forget that truth is only ever lasting and bogus has to wear new dressess every day- so lets hope someday truth will bounce back-the truth that for every person earning livelihood is first moto-if there is no attraction-no one will work-

R Balakrishnan

7 years ago

When distributors pockets are empty, they turn to insurance. In fact in many cases, the distributors are telling clients to switch from mf to insurance ULIP.s If you tabulate the sales of ULIP policies, it would probably more than compensate for the mf industry loss. Anything bad for the investor always sells more.

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