the imf and gold sales

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    :30p ET Tuesday, February 8, 2005


    Dear Friend of GATA and Gold:


    The Reuters story appended here about IMF gold
    sales may be most interesting for the observations
    of the Canadian gold market analyst Martin
    Murenbeeld, who speculates that any gold sold
    will be sold to central banks, particularly those
    with large surpluses of U.S. dollars. Thus the
    gold would remain in official hands and never
    reach the spot market but would continue to do
    its most important work -- remaining theoretically
    available for dumping by governments and thus
    always scaring private investors away from the
    precious metal.


    So would it be better to oppose IMF and central
    bank gold sales or to support complete dishoarding
    by central banks and the IMF so they would forfeit
    a crucial tool of currency market manipulation?


    Or course that is exactly why they are not likely
    ever to part with all their gold.


    CHRIS POWELL, Secretary/Treasurer
    Gold Anti-Trust Action Committee Inc.


    * * *


    IMF Seen Favouring Gold Sales Over Revaluation

    By Lesley Wroughton
    Reuters
    Tuesday, February 8, 2005


    http://www.reuters.co.za/locales/c_newsArticle.jsp;:4208586d:3b951d1b
    70c8856e?type=businessNews&localeKey=en_ZA&storyID=7563449


    WASHINGTON -- The International Monetary Fund is likely to favour
    sales over revaluation as it considers ways to use its huge gold
    cache to help the world's poorest nations without disrupting bullion
    markets, analysts said.


    Finance chiefs of the rich Group of Seven nations asked IMF Managing
    Director Rodrigo Rato at a weekend meeting in London to report back
    by April on proposals for using IMF gold reserves to write off debts
    of the fund's poorest borrowers.


    Any such move will require agreement among the IMF's biggest
    shareholders, including large gold producers Canada, Australia, and
    South Africa, and the United States, which looks likely to oppose
    the proposals.


    The global lender's gold stocks are the world's third largest at
    103.4 million ounces, worth some $42.3 billion at today's market
    prices.


    But under a 1971 agreement, some IMF gold is valued at just over $50
    an ounce, about a tenth of current prices.


    While most analysts think the Washington-based lender's best course
    would be to sell some of its gold stocks rather than revalue them,
    it could face powerful opposition.


    When trade opened on Monday following the weekend G7 meeting, the
    possibility of IMF gold sales sent the yellow metal down to October
    2004 lows as the market tried to guess the outcome.


    Spot gold ended European trade at $413.90/414.70 a troy ounce, after
    hitting its lowest since mid-October at $413.


    Gold analysts bet the gold sale plan would be blocked by the United
    States, which has enough IMF voting power for a veto and has its own
    plan for debt relief involving more grant aid.


    U.S. Treasury Under Secretary John Taylor said at the G7 meeting the
    United States was "not convinced" it was necessary to use IMF gold
    stocks to ease poverty.


    The United States holds the world's largest bullion stockpile and
    gold sales would need the consent of Congress, which together with
    gold producers opposed gold sales in 1999.


    IMF shareholders, however, agreed in December 1999 to an off-market
    gold transaction of up to 14 million ounces to help finance a global
    debt relief initiative for poor nations.


    British finance minister Gordon Brown has said revaluing the gold
    could free up billions of dollars to ease debt burdens on the
    world's poor.


    While revaluing the gold stocks would increase the carrying price of
    the gold on the IMF's books, analysts said, it would not provide
    cash to fund the debt write-off. It would also come with costs for
    certain borrowers and shareholders.


    Selling part of the gold pot would be more straightforward and would
    raise money to fund the cancellation of some $11 billion in debt,
    they said.


    Martin Murenbeeld, a Canadian-based gold analyst, said the IMF had
    the option to bypass the market by selling to buyers such as central
    banks, which would not affect trading.


    He said countries like Japan and China, with their large U.S.
    currency reserves, could swallow the IMF's gold stocks "without so
    much as a hiccup."


    "It is not clear the IMF will choose to sell gold," he said. "We'd
    put the probability of it at less than 25 percent. If it did sell, I
    think it would do so under the auspices of the ... second central
    bank agreement on gold."


    Under that deal, European central banks agreed to cap their total
    gold sales at 2,500 tonnes in the 2004-2009 period, compared with
    2,000 tonnes in the previous five years.


    Murenbeeld said Germany offered an avenue for an official party to
    sell 112 tonnes of gold this year by announcing in December it would
    sell only 8 tonnes of its 120-tonne allotment.


    Nancy Birdsall, head of the Washington-based Center for Global
    Development and author of "Delivering on Debt Relief," said
    revaluing the gold would be less politically sensitive but would
    lower the IMF's cash balance and stifle its ability to lend to needy
    countries in the future.


    "When it is gone, particularly if it is revalued so that there is a
    loss on the balance sheet, the heads of central banks of the G7 and
    other non-borrowing countries will sleep somewhat less well at
    night," Birdsall said.


    "On the other hand, there may be a lot of the world's poorest people
    who get a bit more education and health services, so that is the
    trade-off that ought to be made," she added
 
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