G7 approves IMF gold sales

[derdy]

TOKYO, Feb 9 (Reuters) - The Group of Seven rich nations on Saturday approved the sale of gold by the International Monetary Fund from April as part of a broad reform of its budget, Italian Economy Minister Tommaso Padoa-Schioppa said.

"There was an acceptance among the G7 that resources should be raised by selling gold," Padoa-Schioppa, who is also the head of the IMF's steering committee (IMFC), told reporters after a meeting of G7 finance ministers in Tokyo.

He said the agreement would be finalised in April and would complement spending cuts being drawn up by the IMF under its new managing director, Dominique Strauss-Kahn.

"The current gold price means a flow of income can be ensured," Padoa-Schioppa said.

Morgan Stanley analyst Stephen Jen said the Fund held 103.4 million ounces of gold worth some $92 billion at current market prices. That was up from $23 billion just five years ago.

"The IMF is rich, if it wants to be," he wrote in a recent note to clients, issued before the G7's approval of the gold sales. "This is arguably a good time to consider selling some of these gold holdings and investing the proceeds in financial securities with positive yields."

A surge in oil prices has boosted gold's appeal as a hedge against inflation
continued...

Jim Sinclair: Any IMF sales will be great for gold

^I can't believe they're selling their gold!!! What a bunch of morons! All to save a failing paper-currency system backed by nothing but debt.

 

[AceNZ]

This seems like another step in the orchestrated attempts by central banks and others to suppress the price of gold.

I would actually be surprised if the IMF still has anywhere near as much physical gold now as they claim. Why wouldn't they have leased it out like many central banks have? If they wanted to maximize the sales price, why would they publicly announce a sale, knowing that such an announcement is likely to bring prices down?

This seems like it might also be an attempt to cover their tracks. If most or all of the gold is already gone on leases, it's possible that the return of the gold at the current high prices could bankrupt the borrowers. "Selling" the gold to those leaseholders would in effect be a bailout.

 

[billyjoeallen]

true, they are dumping gold on purpose to supress the price, but that means it's a buying opportunity because they can't do it forever.

 

[JSutter]

Exactly, if the price starts falling then buy buy buy! You might lose money in the short term but long term you should do quite well.

The US did the same in the 80s when silver skyrocketed, they dumped all of the silver they held on the market to drop the price and save the dollar. You see where that got us. They can only do that so many times though because next time they wont have the metals to sell.

 

[davver]

There is an alternative, that certain countries will no longer accept dollars in payment and they want gold. The IMF is run by the US.

Gold is up today on the news.

 

[jonahtrainer]

This IMF sale is to maintain the 'strong dollar policy' which is keeping the gold's price suppressed compared to the US$. The main buyers here will be China and Russia who have probably forced the IMF's hand. This will allow China and Russia to acquire a large amount of gold without affecting the spot price very much.

 

[jaminunit]

Hi all,

So what happens to the price of silver if the IMF sells 400 tons of gold?

Does it go down aswell?

Cheers
J

 

[PatriotG]

Yes.

Its really dependant on how they plan to disperse this out into the maket.

I would imagine it will be similar to the central bank sales back in the mid to late 90s.

They will sell off percentages monthly. 20 tons a month for 1.6 years perhaps?

I doubt they are going to dump the entire piece into the market over a period of 1 or 2 months.

If they sell it monthly over a couple of years, it wont have much of an effect on the price. Maybe slight weakness. corrective move down to 700?

Silver will follow no matter what happens.

What will really be interesting with this is will they sell it for dollars or other currencies?
Banks in the OTC market will price gold in whatever currency you ask for.

I used to make markets in gold priced in Aussie And Canadian dollars.

I would imagine Canada will want it priced in CAD
France, Germany, Italy in Euros
Russia in Rubles (if they are involved at all)
UK in Sterling pounds
And of course The Good Old U.S. in FRN's

These certianly are interesting and history making times we live in.

A related Story From March 2006