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article imageGold sets record after India buys $7 billion worth of gold

By Andrew Moran     Nov 8, 2009 in Business
With gold bullion nearly breaking the $1,100USD mark, it is no wonder why so many countries such as China and India are building their gold reserves as each month passes by.
On Tuesday, the Central Bank of India purchased $6.7 billion worth of gold from the International Monetary Fund, according to the Associated Press. When this news was released, gold surged in price hitting $1,084USD.
Since gold has increased in value this decade, the demand for gold, and silver for that matter, has also increased, especially by governments around amid inflation risks. Investors such as Peter Schiff, President of Euro Pacific Capital, and Jim Rogers, co-founder of the Quantum Fund, believe the United States could be in hyperinflation mode within the next few years, which could mean that gold prices will rise significantly.
India’s purchase of just about 200 metric tons of gold possibly verified that fear. This move has also confirmed that they are diversifying their dollar-denominated assets, similar moves are currently being done by China and Russia.
According to AFP, one senior IMF official said they were “lucky” to sell 200 metric tons for $1,045 per ounce, as opposed to $850 in April.
The United States Dollar has been considerably weak in 2009 due to Japanese-style interest rates, a hard recession and the increase in the money supply by the Federal Reserve System.
Nevertheless, India is the biggest consumer of gold because they import between 700 and 800 tonnes per year, which is 20 per cent of global demand.
Currently, gold is trading at $1096.90 USD and silver is being priced at $17.39 USD.
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