IMF bullion sale plan dents gold

GOLD prices slumped to their lowest level for four months today amid speculation that the International Monetary Fund may sell some of its $8.5bn (£4.5bn) reserves of the precious metal.

Spot gold fell as low as $413.50 an ounce in Asia and traders believe the strengthening dollar could see the price drop through $412, the next significant support level.

Nearly $10 has been wiped off gold over the past week as political leaders at the G7 industrialised nations summit in London wrestled with the idea of an IMF sale to help fund debt relief for poor countries.

Reports today suggested finance ministers from the G7 asked IMF managing director Rodrigo Rato to table proposals at the body's annual general meeting in April.

The recent rally by the American currency has done little to help stabilise markets. Gold sales are permitted by IMF rules, but require an 85% majority of total voting power. The last time sales were on the agenda, in 1999, the US blocked the initiative.

David Holmes, analyst at RBC Capital Markets, said: 'We feel the market has overreacted and that gold is oversold.'

Poorer countries owe an estimated $11bn to the IMF.