IMF Gold Sales

Bullion Vault

What the IMF and CBGA gold announcements say about central bank demand…

WE HAVE BEEN waiting such a long time for clarity on how International Monetary Fund (IMF) is to conduct its gold sales of 403.63 tonnes, writes Julian Phillips of the Gold Forecaster.

The IMF Executive Board has now approved those gold sales. Now the head of the IMF, Dominique Strauss-Kahn, has said “These sales will be conducted in a responsible and transparent manner that avoids disruption of the gold market.

“Most importantly, the sales are strictly limited to 403.3 metric tonnes, which is one-eighth of the fund’s total holdings, so the IMF will continue to hold a relatively large amount of its assets in Gold.”

Prior to selling this gold on the open market, the IMF is prepared to sell the gold directly to central banks or other official sector holders. These sales to official sector holders will be conducted at market prices and would shift official gold holdings without changing total official gold holdings.

Any IMF Gold Sales onto the open, international market would be phased over time, it says. Regular external reporting on gold sales will also be provided to assure markets that gold sales are being conducted in a responsible manner.

Let’s be clear on this: If the IMF is to offer this Gold to other central banks before offering the gold to the open market they are likely to receive bids that would certainly confirm that central banks value gold in their reserves and are prepared to buy it in even at these prices! Whether it received a few or many bids is irrelevant. If all the 403 tonnes were sold this way, then that confirmation would elevate gold as a reserve asset and a measure of value once again.

And if there is an amount left over, it will be sold in a manner that will not brutally bring the Gold Price down, since it must avoid disruption of the gold market.

Which large Dollar surplus holding nations can afford to make this investment? Far more than just China or Russia, we believe. Indeed, we expect the IMF is already receiving offers from these central banks. So will any of this gold make it to the open market? What if only 100 tonnes are left for the market? What if none is left? Sales of this gold to any central bank will be positive for the Gold Price. Sales of all of it will bring a confidence to the market that will send it to new heights.

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