Gold sale `will harm developing countries'

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The Independent Online
THE INTERNATIONAL Monetary Fund's plans to sell gold to raise funds to help write off the debts of the world's poorest countries will actually make many of these nations worse off, the World Gold Council said yesterday.

The proposed sales, which are expected to begin next year, have already helped to depress gold prices and hurt the export earnings of 16 of the 41 poorest and most heavily indebted countries, which are also gold exporters, the WGC said.

Germany, the principle opponent of IMF gold sales, withdrew its objections at the meeting of G7 finance ministers at the weekend. The gold price recovered slightly to close in London at $260.75 an ounce yesterday, but it has fallen by 10 per cent in the last six weeks since the Bank of England followed other central banks and announced plans to sell off up to 60 per cent of the UK's gold holdings, starting on 6 July with an auction of 25 tonnes.

Independent analysts are also bearish about the short-term prospects for gold. "It is highly likely that the price will decline to $220 to $230 in the next three to four months," said Bob Beasley, a technical analyst at Barclays Capital, yesterday.

The IMF sales should be supervised by the Bank for International Settlements, the deputy governor of the South African Central Bank, James Cross, told a conference organised by the Financial Times in London yesterday.

Peter Fava, chairman of the London Bullion Market Association, called on the Bank of England to sell its gold daily on the London Bullion Market instead of through quarterly auctions.

David Clementi, deputy governor of the Bank of England, told the conference that "our approach is designed to minimise uncertainty and stimulate interest in gold as an investment".

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