G20 supports IMF plan to sell 403 tons of gold
By Moming Zhou
signals plan likely to be approved by member
countries this year
Leaders from the Group of 20 nations Thursday
endorsed the International Monetary Fund's plan
to sell 403 tons of gold to raise funds to
support the world's poorest countries.
The announcement from G20 leaders helped add
pressures to Thursday's gold trading. Gold
futures fell $20.30, or 2.2%, to $905.80 an
ounce in recent trading on the Comex division of
the New York Mercantile Exchange. See Metals
The G20 vowed in its statement to "use the
additional resources from agreed IMF gold sales
for concessional finance for the poorest
countries." Read more on G20.
The endorsement suggests that the IMF's gold
sales plan is likely to be approved by its
member countries later this year.
The IMF has been planning to sell gold since as
early as 2007 to diversify its revenues and
strengthen its balance sheet. But the plan needs
to be approved by an 85% majority vote from its
The U.S., which has 17% voting power in the
fund, essentially holds veto power. The U.S.
government has informed the IMF that
Congressional authorization by law is required
before it is able to support the plan.
The U.S. Treasury announced last year that it
will seek authority from Congress.
Hussein Allidina, an analyst at Morgan Stanley,
said in a note Thursday that he expects the IMF
to implement the sales over the next few years,
"but do not believe that this presents a strong
negative risk to gold prices - as it will be
'orderly' and maybe even off market."
Minimize market impact
The IMF, which holds more than 3,200 tons of
gold, is the third-largest holder in the world
after the U.S. and Germany.
Most of the IMF's gold holdings come from the
fund's member countries, which are required to
commit 25% of their quota in gold. The fund
can't sell those holdings into the markets.
But an additional 403.3 tons of gold the fund
acquired through off-market transactions in 1999
and 2000 - such as interest payment from
countries that received IMF loans - are not
subject to the restriction.
If member countries approved the gold sales, the
IMF can find ready buyers in countries with low
gold reserves, especially Russia and some Asian
countries such as China, Taiwan, and India.
China, with less than 1% of its $2 trillion
reserves held in gold, has expressed interest in
buying more gold, crude oil, and other strategic
According to the IMF's plan, the gold selling
will be implemented in coordination with major
central banks to minimize the impact on the
The European Central Bank said Wednesday it had
completed the sale of 35.5 tons of gold.
The gold sales were in full conformity with the
second Central Banks Gold Agreement, which was
signed in 2004 by the ECB and other European
major official gold holders.
The second CBGA, which caps total gold sales of
the signatories at 500 tons a year, expires in
September. Some analysts expect a third CBGA to
be signed before September.