Sri Lankan central bank buying gold to diversify reserves

The Central bank's governor said in an interview that the bankhad been doing so for the past five or six months

NEW DELHI (Reuters) - 

Sri Lanka's central bank has been buying gold for the past five or six months as it diversifies its reserves amid volatile markets, the bank's governor said in an interview on Thursday.

"We have been fairly strong accumulators of gold reserves over the past few months," Sri Lanka Central Bank Governor Ajith Nivard Cabraal told Reuters in a telephone interview from the southern Indian city of Chennai.

"We haven't stopped yet," he added, declining to quantify how much gold the central bank had bought or how much of the more than $4.8 billion of the country's reserves were in gold.

Cabraal's remarks came days after it emerged that the Reserve Bank of India had bought 200 tonnes of gold for $6.7 billion from the International Monetary Fund, prompting speculation that other central banks would look to diversify their reserves by buying gold.

India's move, which surprised markets, was seen by many analysts as one of the clearest signals yet that Asian economies are looking to diversify their holdings in the face of a weakening dollar.

"I believe many central banks for the past few months would have been embarking on a strategy of this nature, especially in volatile times. This is the kind of anchor that many reserve banks generally tend to move towards," Cabraal said.

"Many countries are today diversifying. They are also looking at intrinsic value of their reserves, so gold would be a natural candidate for that kind of reserve accumulation," he said.

He said Sri Lanka's accumulation of gold was not necessarily being funded with dollars.

"It can be a mix of currencies that we use," he said.

Cabraal said the bank has been buying gold at auction in "reasonable quantities on a regular basis," and declined to say how long those purchases would continue.

"We'll probably do that till we think we have enough," he said. (Editing by Alistair Scrutton)

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