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U.S. will beat British chancellor''s campaign to beat poverty with IMF gold sales
From Reuters
Thursday, April 7, 2005
http://www.reuters.co.za/locales/c_newsArticle.jsp?
type=businessNews&localeKey=en_ZA&storyID=8116730
FRANKFURT -- The European Central Bank is cautious about a proposal
for the International Monetary Fund to sell gold reserves to fund
development aid for poor nations, ECB President Jean-Claude Trichet
said on Thursday.
Trichet said there was no agreement within the IMF on the proposal by
UK Chancellor of the Exchequer Gordon Brown to use its gold to write
off debt, and the ECB would urge caution.
"As regards our own position, we would certainly be cautious in this
respect," he told reporters at the ECB's monthly press
conference. "It is discussed in the IMF but I understand there is no
consensus. ... It is certainly the situation where we are far from an
agreement."
Trichet said development aid should be funded out of national
budgets, not asset sales, in line with criticism from Germany's
central bank earlier this week.
The United States has also said it sees no need for the IMF to sell
some of its gold stocks to fund debt relief.
"As central banks we say that development assistance should normally
be financed through budgetary resources ... rather than through the
use of monetary assets," Trichet said.
Finance chiefs from the Group of Seven nations have asked IMF
managing director Rodrigo Rato to report this month on the proposal
to sell part of the fund's 3,217 tonnes of gold, valued at about
$42.3 billion.
"The IMF has concluded that an overall sale could be accommodated
without significant difficulty. This is particularly true if it is
spread over a reasonable period of time," a UK government source told
Reuters on Thursday.
"Deeper debt relief is essential in making the necessary investment
in health and education to achieve the Millennium Development Goals.
Gold sales are firmly on the table," the source added.
Trichet said if the IMF did sell gold, the proceeds might be better
used to shore up its own finances. Any sale should also be within the
cap agreed by central banks under their latest gold accord. Central
banks agreed to limit total gold sales to 2,500 tonnes over five
years from 2004 to avoid distorting the market.
"It would be absolutely essential that it (any sale) would not hurt
the market," Trichet said. "And if there were sales on the market,
then it should not change what we have told the market with our own
gold agreement."
IMF staff have also said any sale should count towards the 2,500
tonne ceiling and UBS Investment Bank analyst John Reade said
Trichet's main concern was to avoid upsetting markets.
"The clear implication is that he doesn't seem to be in favour of a
sale and if it was to take place, it must not hurt the market," said
Reade.
The ECB announced last week it had sold 47 tonnes of gold and Trichet
confirmed that no more sales were planned until after September at
the earliest.
He said the sale was designed to reshape ECB reserves.
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