UPDATE 1-Gold drops after IMF says to sell remaining reserves

* Spot gold slips after IMF says plans to sell gold reserves

* Bullion market steadies after quick decline on IMF news

(Adds details, quotes price)

SYDNEY, Feb 18 (Reuters) - Spot gold XAU= dropped about 1 percent on Thursday after the International Monetary Fund (IMF) said it would sell its remaining gold reserves, but settled in a narrow trading band as the market absorbed the news.

The IMF announced it would begin phased open-market sales of the remaining 191.3 tonnes of gold under a program launched last year to raise new resources for lending. [nN17152668]

Gold was already losing ground early on Thursday and was quoted at $1,114.00 an ounce prior to the IMF statement, which quickly erased a further $8.25 off bullion.

“This wasn’t totally unexpected given what the IMF has been saying, but it was still enough to give the market a rattle,” a gold dealer in Sydney said.

Spot gold was quoted at $1,108.10 an ounce at 2219 GMT.

Spot gold hit a peak of $1,126.85 an ounce ahead of the IMF statement, its highest since Jan. 20, before fresh gains in the U.S. currency pressured prices from highs.

“This is probably a knee-jerk reaction. At the end of the day, the sales from the IMF are well-known,” said Jacob Oubina, senior currency strategist for

To avoid disruptions of the gold market, the IMF said the open-market sales “will be conducted in a phased manner over time.”

The Fund announced last year it would sell a total of 403.3 tonnes of gold, about one-eighth of its total stock, to diversify its sources of income and increase low-cost lending to poor countries.

Until now the gold has only been made available to central banks. India, Mauritius and Sri Lanka have been purchasers. (Reporting by James Regan)