Bank Negara officials have kept mum on the reported massive reduction of the country's gold reserves. According to the International Monetary Fund (IMF), Malaysia's gold reserves had gone down by half in August this year, from 2.34 million ounces in July.

A senior official in Bank Negara, who asked to remain anonymous, said the bank's reserve management issues were not to be made public. "You have to trust us with our judgement," he told malaysiakini .

On Dec 10, the IMF's International Financial Statistics reported that Malaysia's gold reserves had gone down by half in August.

University of Malaya economics professor Jomo Kwame Sundaram said that the Fund's data indicated a decline of 1.17 million ounces. He added that the gold was sold at a time when prices were low.

"The price of gold on the London Metal Exchange had gone down to a two-month low price of US$252.55 per oz. on Aug 25 (from US$261.50 on Aug 17)," he said.

He added that rumours of heavy selling by the Malaysian authorities were said to have further depressed gold prices.

"Taking the August average price of US$256.72 per oz, 1.17 million oz of gold would have sold for US$300.4 million or about RM1.14 billion.

Jomo questioned the urgency in selling half of the country's gold reserves at a time of low prices. "I believe that it had nothing to do with shoring up the balance of payments," he said, adding that Malaysia had a healthy balance of payments.

Economics lecturer Charles Santiago said that it was common for central banks to routinely sell off some of their gold reserves, but the volume of gold involved in this case posed a number of questions.

"For the purpose of transparency, two issues should be raised here. Firstly, why did Bank Negara sell at such a low price? Secondly, one should ask about the nature of the transactions, as in which markets were involved and who the buyers were."

Jomo has mooted the possibility that the gold sell-down was to boost the liquidity of the country's reserves to brace for the Sept 1 repatriation of foreign funds.

"Could the sales have been timed to prepare for the authorities' anticipated Sept 1 exodus?" he asked.

According to Governor of Bank Negara Ali Abul Hassan Sulaiman, about US$328 million (RM1.246 billion) was repatriated on Sept 1, the day when money invested by foreigners on the local stock market could be taken out of the country without any levy.