Commonwealth likely to back compromise on gold sell-off

THE INTERNATIONAL Monetary Fund is moving towards a compromise on its plan to sell off gold stocks, heading off what could have been a damaging row at its annual meeting next week.

Instead of selling the gold on the open market, it is likely to make off-market sales to member governments. Commonwealth finance ministers are likely to back the plan, a Commonwealth official said yesterday.

"I believe there is an emerging consensus behind this proposal," said Rumman Faruqi, director of the Commonwealth Secretariat economic affairs division. "The IMF proposal is to sell gold directly to the central banks of countries so that it would be off-market sales and would not have a direct effect of impacting gold prices," he added.

The plan would involve selling 14 million ounces of gold, with the proceeds going to fund an initiative to reduce the debts of the world's poorest countries.

Britain yesterday auctioned off a further 25 tonnes of its gold reserves, part of a planned 415 tonne sell-off. The auction was eight-times oversubscribed. The gold price rose to its highest point in three months afterwards, to $264 a tonne, prompted in part by reports that the Swiss central bank had delayed its plans for a sell-off.

But the auction was criticised by the World Gold Council. "The low price achieved by [the] auction - just $255.75 per ounce - further demonstrates the foolishness of selling such an important national asset into a market at its weakest point in the past two decades," said Gary Mead, head of research at the WGC. "The Government received pounds 2.83m less than in the first sale in July and the impact of the two sales so far have cost the Treasury more than pounds 540m."

Trevor Manuel, South Africa's finance minister, yesterday predicted gold prices should recover. "Reports show increasing demand from countries such as the US, China and India," he said.