IMF to Proceed with Limited Sales of Gold
| Author | Glenn Gottselig |
| Position | IMF Survey online |
The Board approved the sale of up to 403.3 metric tons, or about one-eighth of the Fund's total gold holdings. The proceeds will help finance a new income model for the IMF, making the 186-member institution less dependent on its lending revenue to cover expenses, which include surveillance of members' economic and financial policies and other non-lending activities. Part of the money raised will also help boost financing for concessional lending to low-income countries.
"I am delighted that the Executive Board has given its overwhelming backing to limited gold sales to put the financing of the IMF on a sound long-term footing, and to enable us to step up much-needed concessional lending to the poorest countries," Managing Director Dominique Strauss-Kahn stated. "These sales will be conducted in a responsible and transparent manner that avoids disruption of the gold market."
As the third largest official holder of gold after the United States and Germany, the IMF recognizes that it needs to pay close attention to the potential effect of its actions on the gold market. Certainly, unexpected large sales of gold could disrupt the gold market.
The IMF is therefore taking a number of precautions to prevent market disruptions. Importantly, a firm limit on the amount of gold to be sold has been set at 403.3 metric tons, and the gold market has been aware of this amount for some time, as it has not changed since the Executive Board endorsed the new income model in April 2008.
Transparency will play a key role in the gold sales, with the IMF set to inform markets before any sales on the gold markets begin. Prior to any sales on the market, the IMF would be prepared to sell gold directly to central banks or other official sector holders if they expressed interest. These sales to official sector holders would be conducted at market prices, and would shift official gold holdings without changing total official holdings.
The IMF has sold some of its gold holdings on several occasions.
Following a 1978 amendment to its Articles of Agreement, the IMF may sell gold outright only on the basis of prevailing market prices, or may accept gold in the discharge of a member's obligations at an agreed price, based on market prices at...
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