India; diversifies its reserves from the Dollar

Shouldn't India and the other developing countries (Brazil or China) keep their reserves in the U.S. Dollar currency? what motives made India buy such a significant amount of gold?

Well, these questions arose since India is going to buy $6.7 billion of gold from the IMF. of course, the news turned up the markets of commodities all over the world, launching a big signal of alert to the U.S. currency and to other countries that keep their reserves under the American currency. In fact, as the Dollar is just getting worse, and unemployment rate reached its peak of 10% in U.S. Many countries that hold their reserves in U.S. Dollar are starting to look around for alternatives, and right now the most attractive and profitable way is the purchase of Gold.

Media Analysis:

Let's start from Bloomberg which it explains the situation best. Firstly, it points out questions on how and why is the gold becoming so attractive in the last period and why is not the dollar being the main starring of the situation. It then explains in four detailed key points the possible solutions and motives for why gold is coming back to attention during the last years. Another thing that i liked about the article is that it did not concentrate on the amount of the deal, but regarding its efficiency and its symbolic signal that it is sending towards the market and other countries. Furthermore, it reflects about the fact that this purchase of gold will probably trigger a bidding war to buy gold from the IMF. Bearing in mind that the lending institution is now back with fresh liquidity to help the nations that seek it more, forecasting which country will be next in buying gold. In other words, the article is attempting to say that a gold revival has begun. Especially for the Asian countries that expects the American dollar to appreciate in value.

Moving to the Wall Street Journal, here it states a similar point which is the significant shift away from the U.S. Dollar holdings. As we all may know the article then starts to give analyst's opinion regarding the matter. They focus on the fact that this strategy made by India is a type of asset diversification strategy. But also putting Indian Finance Minister statements. He explains that the American dollar is still a preferable currency, and that it will still be a significant part of the foreign exchange holdings, as most of India's external debt is in dollars"
In addition to the Bloomberg article, here numbers and data are given. Stating the effect had from the purchase of gold by India to the market boosting the prices of gold up. Having a record in the New York Mercantile Exchange at $1.084.30 per ounce.
Moreover it does here as well make predictions of who will be the next buyer countries like China or Russia would be the probables. I would recommend this and the previous article for financial readers.

The Economist article, sees the move made by India as a cultural move. Meaning that in the country the use of gold is high; from necklace, anklets and other pieces. however, it does explain briefly in two paragraphs the main points of the deal though very shortly. It might be attractive to fast-readers than financial readers.

My conclusion is that both the WSJ and Bloomberg have focused on the main key points of the deal, but personally, I would choose the Bloomberg article due to its smooth way of writing and transmitting its probable expectations from the Indian deal.
I then think think that the Indian Finance Minister have made an intelligent strategy by buying gold, as i think probably that in the close future a big currency will fall dramatically, and by buying gold it has shown that they are not completely dependent from the trend of the U.S. Dollar. And that diversification is a main factor for Asian central banks in order for them to find a different way which gold seems for now being the right way of doing that.

Sources:

-Bloomberg:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ae2wslm0YHgc

-WSJ:
Printed copy

-Economist:
http://www.economist.com/businessfinance/displaystory.cfm?story_id=14816649