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South African government officials notice that their country mines a lot of gold
8:30p 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?
Of 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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