MUMBAI (Commodity Online): Will India go in for buying the 191 tonnes of gold that the International Monetary Fund (IMF) plans to sell soon? Yes, India is a potential buyer for the remaining stock of IMF gold that is to be sold in the open bullion market, analysts said on Wednesday.

Last week, IMF announced that it is going to sell the remaining 191 tonnes of gold as part of its 403 tonnes of approved gold sales programme. In November 2009, India bought 200 tonnes of gold from IMF as part of the Reserve Bank of India (RBI) plans to mop up its foreign exchange reserves in the yellow metal.

Ever since the latest IMF announcement on its gold sale plans, there has been speculation that China, that has been aggressively pursuing to step up gold reserves, would jump into the latest gold selling offer from IMF.

But it is unlikely that China would go for the later offer of IMF gold sale. The China Gold Association has already said that it is not feasible for China to buy the IMF bullion, as any purchase or even intent to do so would trigger market speculation and volatility.

Instead the Association said the country would continue to shore up its gold reserves by acquiring gold mines abroad rather than purchases on the international market.

But China's decision to shy away from buying gold will be the winning hand for India. Bullion analysts say there is a big possibility that India will try to buy maximum quantity of gold that IMF is set to sell.

Yes, India is eager to buy the remaining portion of IMF gold for two reasons. First, India's RBI has been taking a series of measures to increase its gold holdings in the foreign exchange reserves. Secondly, the turbulence of the US dollar and the Euro makes it crucial for India to buy IMF gold now, said Shyamal Mehta, bullion analyst with Commodity Online Research.

He said RBI has recently come out statements that gold remains the best and safe investment asset. India feels that buying gold from IMF will boost the country's image as the world's largest consumer and importer of the yellow metal, Mehta pointed out.

The World Gold Council (EGC) recently said that India still remains the world's largest consumer and importer of gold. Despite high price of gold, Indians have been on a gold buying spree as Indian households consider the yellow metal as the best investment asset.

India's decision to buy 200 tonnes of gold from IMF last year is expected to find mention in the annual budget that is being presented in the Indian parliament on Friday, February 26.

In November last year, India had bought 200 tonnes of gold from the IMF for over $6.7 billion after which the global bullion market witnessed a bull run which lifted the yellow metal prices above $1150 per ounce. Soon after, gold prices zoomed to touch $1227 per ounce.

The fresh attempt by the Indian central bank to buy at least some portion of 191 tonnes of IMF gold on sale may lead to the soaring prices of gold.

At the time of the purchase of the first lot of 200 tonnes, RBI had said it was part of its foreign exchange reserves management operations.According to IMF, it has no fixed timetable for completing the sale.

RBI is on a buying spree to enrich its reserves and it wishes to change it to gold rather than dollar. That was evident when India first bought the 200 tonne gold. In just three weeks after it bought the gold, India benefited by $800 million on the investment of $6.7 billion it made in buying 200 tonnes from IMF.

Since 1999, RBI has been periodically valuing its gold reserves at prices close to the market. It has not done so since it purchased the gold from IMF.

RBI holds its forex reserves in a basket of currencies expressed in dollar terms. It is able to earn only a nominal return on the dollar reserves. The buying of IMF gold has a sentimental significance to India, as the government had to pledge gold with the Bank of England in 1991 to borrow money to maintain imports.