Outlook: IMF gold sales
Friday 03 September 1999
Money in the western world is now almost entirely electronic, but there are still many places where gold is still the only safe asset to hold against civil unrest, corruption, banking insolvency and financial instability.
Even the UK has found it hard enough to sell the idea to a suspicious public of disposing of the official gold reserves, so it was always going to be more controversial still when the International Monetary Fund decided to follow suit. As the IMF's Stanley Fischer - South African born himself - has now admitted, falling gold prices harm the economies of the poor gold producing countries, and could cause massive social disruption for miners.
Mr Fischer is correct to argue that the IMF's planned gold sales can have played no more than a tiny part in the recent decline in the gold price. The market has known for more than two years that the Fund would eventually offload some of its gold reserves in order to finance debt relief, although the likely amount was unclear.
What's more, the gold price has been heading steadily downhill since the late-1970s, when it ceased to underpin the international monetary system. Even the UK's surprise announcement in May about the sale of gold reserves had only a small impact relative to the earlier, long-term decline.
However, the IMF's Plan B, to sell its gold off-market, will acquit it beyond doubt of the charge of contributing to the decline in the gold price and thereby undermining the poor countries it is supposed to be helping. Sales to central banks instead of an auction would have the added merit of forcing IMF members to contribute the funds needed to plug the gap in financing the G7 debt relief package.
The need for the Fund to sell gold only ever arose because member countries refused to contribute generously enough to debt relief in the first place.
The US Congress was always a particular hurdle to increased cash contributions to the IMF. So it is a pleasing irony that the gold fanatics in Congress will now have to welcome an increased US contribution through the backdoor of a Fed purchase of IMF gold.
- 1 Howard Jacobson: Let's see the 'criticism' of Israel for what it really is
- 2 Gingers face extinction due to climate change, scientists warn
- 4 BBC’s new Game of Thrones slayer 'The Last Kingdom' relies on Saxon appeal, creators say
- 5 PornHub begs users to stop uploading video clips of Brazil getting beaten 7-1
Game of Thrones author George RR Martin says 'f*** you' to fans who fear he will die before finishing Westeros saga
Jennifer Lawrence face palms Emma Watson at Christian Dior show in Paris
Gingers face extinction due to climate change, scientists warn
Pamplona Running of the Bulls 2014: Briton critically injured in San Fermin festival
Israel's deadliest Gaza air strikes yet kill five children from same family as Palestinian rocket barrage continues
Sustained immigration has not harmed Britons' employment, say government advisers
British jihadist calls for 'flag of Islam' over Downing Street and Buckingham Palace
Australia facing international condemnation after turning around Sri Lankans at sea
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
There’s a nasty smell in the political air – and it’s coming from the Tories
iJobs Money & Business
£200 - £450 per day: Harrington Starr: Web Services Developer Web Services, WP...
£18000 - £25000 per annum + DOE, OTE £40000: SThree: LONDON - BRISTOL - DUBLIN...
£250 - £295 per day + competitive: Orgtel: Financial Accountant - IFRS - Glouc...
£30000 - £40000 per annum + excellent benefits: Deerfoot IT Resources Limited:...