The IMF said Sunday it expects to record a profit of $ 5.1 billion from the sale of gold in the financial year ended April 30, 2010.
In a statement, the International Monetary Fund, which sold gold to member countries including India last year, said gold sales is a part of the multilateral lending agency’s new income model, mainly aimed at increasing its resources to lend to low-income countries.
The net income in the 2010 financial year (ended April 30) would include “gold profits estimated at about SDR 3.5 billion ($ 5.1 billion) from part of the limited sale of the fund’s gold,” according to the IMF.
SDR or Special Drawing Rights is an international reserve asset created by the IMF to supplement its member countries’ official reserves. The value of SDR is based on a basket of four key international currencies -- the euro, Japanese yen, pound sterling and US dollar.
In its mid-year review, the IMF had estimated that its profits from gold sales would be worth about SDR 3.25 billion.
This projection has now been raised to SDR 3.5 billion.
The IMF sold 212 metric tons of gold in October-November, 2009. Out of the total, India purchased 200 tonnes at an estimated cost of $ 6.7 billion.
“The gold sales, a central element of the fund’s new income model, will fund an endowment and also increase the fund’s resources for lending to low-income countries...,” the agency said in a recent statement.
Meanwhile, the IMF is expected to report a net operational income of SDR 365 million (about $ 534 million) for financial year 2010, compared to earlier estimates that pegged net operational income at SDR 290 million (about $ 424 million) at the beginning of the year.
“This improved outlook is primarily attributed to higher than expected earnings on the fund’s investment portfolio, which is made up largely of fixed-income securities, and lower net administrative expenditures, in SDR terms, reflecting movements in the US dollar/SDR exchange rate,” the statement noted.
Showing posts with label IMF. Show all posts
Showing posts with label IMF. Show all posts
Monday, 24 May 2010
Monday, 19 April 2010
NIA:IMF SDRs are inflationary, buy silver-gold now
The International Monetary Fund (IMF) has issued new Special Drawing Rights worth approximately $300 bn which shows that inflation is a major problem the worldover, according to National Inflation Association (NIA). Perhaps, thisis the right time to buy gold and silver. NIA said that SDR's may not become the new world reserve currency. In a set of 10 questions and answers on precious metals, inflation and crude oil, it addresses key issues of interest to US and global investors.
1) How much over spot is a good price for silver and gold?
A good price for a 1 oz silver coin like an American Eagle or Canadian Maple Leaf is 12% over spot, and a good price for a 1 oz silver bar is 6% over spot. For gold, a good price for a 1 oz gold coin like an American Eagle or Canadian Maple Leaf is 4% over spot, and a good price for a 1 oz gold bar is 2% over spot. The larger premium for silver compared to gold indicates a shortage in the physical silver market.
2) Now that GATA has blown the doors off the LBMA ponzi scheme, and we know there is only 1 oz of silver for every 100 oz represented on paper, why hasn't there been a panic to dump paper and go into physical? What will it take to trigger a short squeeze?
We don't believe there is only 1 oz of physical silver for every 100 oz represented on paper. Most likely, there is 1 to 3 times more paper silver than physical silver. This is still a major problem that will ultimately result in a major silver shortage and short squeeze, once a large number of COMEX holders begin to demand physical delivery of silver. This is a topic that we will be covering extensively in our new documentary coming out next month.
3) If the silver market is controlled by JP Morgan and others, how does the little guy stand a chance of making money?
The manipulation by JP Morgan through naked short selling is providing an opportunity for normal everyday investors to purchase silver at dirt-cheap prices. Without JP Morgan's naked short selling, it's possible silver would already be well above $30 per ounce right now.
Remember, JP Morgan is not manipulating silver up, they are manipulating it down and the manipulation can't last forever. When investors around the globe call for physical delivery of their silver, there will be a shortage of physical silver and JP Morgan will be forced to cover their naked short position, causing silver prices to explode to the upside.
NIA believes silver will eventually see the biggest short squeeze in the history of all commodities.
4) What is the best way to respond to the overused and baseless argument that we needed the stimulus package or else the U.S. economy would've crashed and we would've had another Great Depression?
The stimulus package didn't stimulate the economy but it actually stifled it because we needed to go deeper into debt and borrow the money that was used on projects that added no production to our economy. The jobs that were created were temporary but we still owe the debt. We will need to print the money to pay the debt back, which will ultimately lead to hyperinflation.
Our country does not have access to unlimited financial resources. The money that we borrowed for the stimulus package took away from the money that could've been borrowed by a small business, which could've invested the money into building a factory that would've produced goods and generated real wealth for decades to come.
Our economy needed to enter a recession in order to clean out the toxic assets and imbalances. Today, all of the toxic assets still exist on the balance sheet of the Federal Reserve and the economic imbalances that caused the last crisis have grown larger than ever before.
Instead of going through a steep recession, we will now be forced to eventually endure a hyperinflationary Great Depression. Remember, when there is a boom created by cheap credit, there must eventually be a bust. There is no way around it. All the government has done is push the real collapse down the road while making the eventual outcome a lot more devastating.
5) Why do you not like investing into Real Estate? Isn't it smart to buy Real Estate that is cash-flow positive and then use that cash-flow to purchase precious metals?
Real Estate that is cash-flow positive today, might not be so in the future. In our opinion, it will be impossible for landlords to increase their rents at the same rate as inflation. If you are a landlord, your real cash-flow will diminish over time.
During periods of high inflation, preserving ones purchasing power becomes a lot more important than generating cash-flow. We believe Real Estate will continue to decrease in real value because Real Estate is not very liquid and prices are still at artificially propped up levels. Those who own Real Estate will do poorly compared to those who own precious metals.
6) Do you believe the discovery of many large oil shale deposits in the U.S. will drive down oil prices?
There are several major shale deposits in the U.S. that contain large amounts of oil and natural gas. The cost of extracting oil from these formations is very high and we doubt it will have much of a damper on oil prices. Although it is cheaper and easier to extract natural gas from these formations, we believe the existence of these shale deposits is already factored into our current low natural gas prices. We expect to see many vehicles convert to run off of natural gas in the future, which could lessen the demand for oil, but it will take many years for these conversions to take place. We believe $100+ oil is inevitable due to increasing demand from China and India, and the Federal Reserve's monetary inflation.
7) Do you believe Special Drawing Rights (SDRs) being issued by the IMF will accelerate the U.S. into hyperinflation? Are SDRs being setup to become the new world reserve currency?
From 1970 to 1981 the IMF issued $30 billion worth of SDRs, and gold and silver prices soared to record real highs. The IMF recently issued approximately $300 billion worth of new SDRs. Certainly, this shows that inflation is a major problem around the world and now is the time to own gold and silver.
We don't believe SDRs are being setup to become a new world reserve currency. It would be much more beneficial to China for them to allow their own currency to become the reserve currency.
8) I am considering a career in the military. With the coming collapse, will the military offer me and my family any type of security or will the hyperinflation affect the military as well?
We don't think the U.S. government will be able to afford the military it has today for much longer. Our military needs to be scaled back immediately if we want to prevent hyperinflation. During hyperinflation, the army will most likely be used mainly to protect government officials. Those who are left in the military will demand to be paid in gold, until our gold reserves are completely depleted.
9) I work at Disney Orlando as a server. I make about $300 a day on average. My seniority is rather high. What will happen to my job when the economy collapses?
We can't picture Disney World in Orlando ever closing its doors and going out of business. Certainly, your wages will decline in purchasing power and workers will demand higher nominal wages. Disney will have to increase admission fees and if visitors can't afford them, Disney will layoff employees. Hopefully your level of seniority will ensure your job safety.
The good thing about Disney World is many Asian visitors and foreign tourists come each year. We might see the percentage of foreign visitors increase in the years to come and make up a larger percentage of Disney World's theme park revenues.
10) If the government imposes a value added tax, how will that affect inflation?
We believe Americans are already taxed to the hilt and any additional taxes will have the effect of reducing tax revenues. We need to move the discussion in America away from taxes and towards inflation. It is impossible to fund our current level of government spending and pay back our national debt through taxation. It will all be paid through massive monetary inflation.
1) How much over spot is a good price for silver and gold?
A good price for a 1 oz silver coin like an American Eagle or Canadian Maple Leaf is 12% over spot, and a good price for a 1 oz silver bar is 6% over spot. For gold, a good price for a 1 oz gold coin like an American Eagle or Canadian Maple Leaf is 4% over spot, and a good price for a 1 oz gold bar is 2% over spot. The larger premium for silver compared to gold indicates a shortage in the physical silver market.
2) Now that GATA has blown the doors off the LBMA ponzi scheme, and we know there is only 1 oz of silver for every 100 oz represented on paper, why hasn't there been a panic to dump paper and go into physical? What will it take to trigger a short squeeze?
We don't believe there is only 1 oz of physical silver for every 100 oz represented on paper. Most likely, there is 1 to 3 times more paper silver than physical silver. This is still a major problem that will ultimately result in a major silver shortage and short squeeze, once a large number of COMEX holders begin to demand physical delivery of silver. This is a topic that we will be covering extensively in our new documentary coming out next month.
3) If the silver market is controlled by JP Morgan and others, how does the little guy stand a chance of making money?
The manipulation by JP Morgan through naked short selling is providing an opportunity for normal everyday investors to purchase silver at dirt-cheap prices. Without JP Morgan's naked short selling, it's possible silver would already be well above $30 per ounce right now.
Remember, JP Morgan is not manipulating silver up, they are manipulating it down and the manipulation can't last forever. When investors around the globe call for physical delivery of their silver, there will be a shortage of physical silver and JP Morgan will be forced to cover their naked short position, causing silver prices to explode to the upside.
NIA believes silver will eventually see the biggest short squeeze in the history of all commodities.
4) What is the best way to respond to the overused and baseless argument that we needed the stimulus package or else the U.S. economy would've crashed and we would've had another Great Depression?
The stimulus package didn't stimulate the economy but it actually stifled it because we needed to go deeper into debt and borrow the money that was used on projects that added no production to our economy. The jobs that were created were temporary but we still owe the debt. We will need to print the money to pay the debt back, which will ultimately lead to hyperinflation.
Our country does not have access to unlimited financial resources. The money that we borrowed for the stimulus package took away from the money that could've been borrowed by a small business, which could've invested the money into building a factory that would've produced goods and generated real wealth for decades to come.
Our economy needed to enter a recession in order to clean out the toxic assets and imbalances. Today, all of the toxic assets still exist on the balance sheet of the Federal Reserve and the economic imbalances that caused the last crisis have grown larger than ever before.
Instead of going through a steep recession, we will now be forced to eventually endure a hyperinflationary Great Depression. Remember, when there is a boom created by cheap credit, there must eventually be a bust. There is no way around it. All the government has done is push the real collapse down the road while making the eventual outcome a lot more devastating.
5) Why do you not like investing into Real Estate? Isn't it smart to buy Real Estate that is cash-flow positive and then use that cash-flow to purchase precious metals?
Real Estate that is cash-flow positive today, might not be so in the future. In our opinion, it will be impossible for landlords to increase their rents at the same rate as inflation. If you are a landlord, your real cash-flow will diminish over time.
During periods of high inflation, preserving ones purchasing power becomes a lot more important than generating cash-flow. We believe Real Estate will continue to decrease in real value because Real Estate is not very liquid and prices are still at artificially propped up levels. Those who own Real Estate will do poorly compared to those who own precious metals.
6) Do you believe the discovery of many large oil shale deposits in the U.S. will drive down oil prices?
There are several major shale deposits in the U.S. that contain large amounts of oil and natural gas. The cost of extracting oil from these formations is very high and we doubt it will have much of a damper on oil prices. Although it is cheaper and easier to extract natural gas from these formations, we believe the existence of these shale deposits is already factored into our current low natural gas prices. We expect to see many vehicles convert to run off of natural gas in the future, which could lessen the demand for oil, but it will take many years for these conversions to take place. We believe $100+ oil is inevitable due to increasing demand from China and India, and the Federal Reserve's monetary inflation.
7) Do you believe Special Drawing Rights (SDRs) being issued by the IMF will accelerate the U.S. into hyperinflation? Are SDRs being setup to become the new world reserve currency?
From 1970 to 1981 the IMF issued $30 billion worth of SDRs, and gold and silver prices soared to record real highs. The IMF recently issued approximately $300 billion worth of new SDRs. Certainly, this shows that inflation is a major problem around the world and now is the time to own gold and silver.
We don't believe SDRs are being setup to become a new world reserve currency. It would be much more beneficial to China for them to allow their own currency to become the reserve currency.
8) I am considering a career in the military. With the coming collapse, will the military offer me and my family any type of security or will the hyperinflation affect the military as well?
We don't think the U.S. government will be able to afford the military it has today for much longer. Our military needs to be scaled back immediately if we want to prevent hyperinflation. During hyperinflation, the army will most likely be used mainly to protect government officials. Those who are left in the military will demand to be paid in gold, until our gold reserves are completely depleted.
9) I work at Disney Orlando as a server. I make about $300 a day on average. My seniority is rather high. What will happen to my job when the economy collapses?
We can't picture Disney World in Orlando ever closing its doors and going out of business. Certainly, your wages will decline in purchasing power and workers will demand higher nominal wages. Disney will have to increase admission fees and if visitors can't afford them, Disney will layoff employees. Hopefully your level of seniority will ensure your job safety.
The good thing about Disney World is many Asian visitors and foreign tourists come each year. We might see the percentage of foreign visitors increase in the years to come and make up a larger percentage of Disney World's theme park revenues.
10) If the government imposes a value added tax, how will that affect inflation?
We believe Americans are already taxed to the hilt and any additional taxes will have the effect of reducing tax revenues. We need to move the discussion in America away from taxes and towards inflation. It is impossible to fund our current level of government spending and pay back our national debt through taxation. It will all be paid through massive monetary inflation.
Sunday, 8 November 2009
Scrap gold sales zoom in India over IMF gold deal
Bullion traders in India are afraid of gold price these days. The big news of India buying 200 tonnes of gold from the International Monetary Fund (IMF) sent the yellow prices to dizzy heighs this week. Gold traders say the record jump in prices has sent the bullion market across the country to silence.
“There is no buying happening at these high gold prices. Customers are coming to jewellery shops to sell old gold, not to buy new gold ornaments and gold coins. Everyone feels that this is a market to sell, not to buy,” says Sanjeev Srivastava, a gold trader in Mumbai’s Zaveri Bazaar.
According to Srivastava, scrap gold sales are zooming in India thanks to the record price rise in yellow metals. "At least 10 tonnes of scrap gold must have been sold in the Mumbai bullion market this week. People are cashing in on the bull market in gold," he said.
But Srivastava, who used to supply at least two tones of gold to various jewellery shops across India, says jewellery chains are holding on to the old stocks as there is hardly any buying happening. “Only parents whose daughters’ marriage are fast approaching are the ones who are buying gold these days. Gold investors are keeping away from the bullion market as the prices are very high,” he sadded.
Gold prices touched a record 16,677 rupees per ten grams this week in Mumbai markets. On Friday, strong rupee and dull buying pulled down gold prices a little bit to 16,567 per ten grams.
Karan Khan, another bullion dealer said that gold buying will pick up during the wedding season in India which is expected to last till December end. “By that time, I feel gold prices might fall from the record prices that we are seeing these days,” Khan told Commodity Online.
On Friday, the Indian rupee strengthened to its highest in more than a week as currency traders sold dollars on gains in the local sharemarket and watched the US dollar movements.
Gold prices in the Indian bullion market have been going up this week on the big news that the International Monetary Fund (IMF) has sold 200 tonnes of gold to the Reserve Bank of India (RBI) for $US6.7 billion.
In April this year, IMF decided to sell 403.3 tons of gold as part of a plan to shore up its finances and lend at reduced rates to low- income countries. In the last few months, there have been reports that China and India could be the suitors to purchase the IMF gold. India has jumped into the fray by buying almost half of the IMF gold at about $1,045 an ounce.
Dubai-based bullion analyst Mark Robison says everyone expected China to buy the IMF gold in the first phase. “It is a surprise that India has jumped in the first place to purchase the IMF gold. India is the largest marketplace for gold in the world. I think by buying IMF gold, India has shown increased interest in diversifying out of US assets as the dollar loses value against other currencies,” Robison told Commodity Online.
China is the world’s biggest gold producer. In April, China increased reserves of gold by 76 percent to 1,054 tons since 2003.
In fact, IMF has kick-started the gold selling plan by selling the first tranche of the yellow metal to India, the largest consumer of gold in the world. The gold sales were conducted daily over a two-week period from Oct. 19-30, to "give some protection to short-term fluctuations in the market".
The sale is part of an agreement struck in September among IMF member countries to sell 403.3 tonnes of the fund's gold stocks to diversify its sources of income and to increase low-cost lending to poor countries.
“There is no buying happening at these high gold prices. Customers are coming to jewellery shops to sell old gold, not to buy new gold ornaments and gold coins. Everyone feels that this is a market to sell, not to buy,” says Sanjeev Srivastava, a gold trader in Mumbai’s Zaveri Bazaar.
According to Srivastava, scrap gold sales are zooming in India thanks to the record price rise in yellow metals. "At least 10 tonnes of scrap gold must have been sold in the Mumbai bullion market this week. People are cashing in on the bull market in gold," he said.
But Srivastava, who used to supply at least two tones of gold to various jewellery shops across India, says jewellery chains are holding on to the old stocks as there is hardly any buying happening. “Only parents whose daughters’ marriage are fast approaching are the ones who are buying gold these days. Gold investors are keeping away from the bullion market as the prices are very high,” he sadded.
Gold prices touched a record 16,677 rupees per ten grams this week in Mumbai markets. On Friday, strong rupee and dull buying pulled down gold prices a little bit to 16,567 per ten grams.
Karan Khan, another bullion dealer said that gold buying will pick up during the wedding season in India which is expected to last till December end. “By that time, I feel gold prices might fall from the record prices that we are seeing these days,” Khan told Commodity Online.
On Friday, the Indian rupee strengthened to its highest in more than a week as currency traders sold dollars on gains in the local sharemarket and watched the US dollar movements.
Gold prices in the Indian bullion market have been going up this week on the big news that the International Monetary Fund (IMF) has sold 200 tonnes of gold to the Reserve Bank of India (RBI) for $US6.7 billion.
In April this year, IMF decided to sell 403.3 tons of gold as part of a plan to shore up its finances and lend at reduced rates to low- income countries. In the last few months, there have been reports that China and India could be the suitors to purchase the IMF gold. India has jumped into the fray by buying almost half of the IMF gold at about $1,045 an ounce.
Dubai-based bullion analyst Mark Robison says everyone expected China to buy the IMF gold in the first phase. “It is a surprise that India has jumped in the first place to purchase the IMF gold. India is the largest marketplace for gold in the world. I think by buying IMF gold, India has shown increased interest in diversifying out of US assets as the dollar loses value against other currencies,” Robison told Commodity Online.
China is the world’s biggest gold producer. In April, China increased reserves of gold by 76 percent to 1,054 tons since 2003.
In fact, IMF has kick-started the gold selling plan by selling the first tranche of the yellow metal to India, the largest consumer of gold in the world. The gold sales were conducted daily over a two-week period from Oct. 19-30, to "give some protection to short-term fluctuations in the market".
The sale is part of an agreement struck in September among IMF member countries to sell 403.3 tonnes of the fund's gold stocks to diversify its sources of income and to increase low-cost lending to poor countries.
Saturday, 19 September 2009
Finally, IMF to sell 403 tonnes of gold
Finally, the International Monetary Fund (IMF) is selling its 403 tonnes of gold after months of speculation over the sale and its presumed impact on markets.
IMF said in a statement the sales would be in a volume strictly limited to 403.3 tonnes, with these sales to be conducted under modalities that safeguard against disruption of the gold market.
The IMF said the decision was a central element of a new income model for the institution that had been approved by the executive board in April 2008.
The Group of 20 developed and developing countries decided at their April summit in London that the money raised by the gold sales should allow the IMF to offer favorable conditions on loans to the poorest countries.
The IMF said the sale of gold will also increase the fund’s resources for lending to low-income countries, a strategy that won board backing in July.
The amount of gold is one-eighth of the current holdings of the Washington-based IMF, one of the world’s biggest holders of the precious metal.
The IMF did not state the value of the gold to be sold but based on the current bullish market price for the metal, it is estimated that the sale would fetch 13 billion dollars.
Under the approved plan, the IMF would offer to sell gold directly to central banks or other official sector holders if there were to be interest from such holders.
The IMF said such transactions would redistribute official gold holdings without changing total official holdings.
Under the fund’s Articles of Agreement, all gold sales must be conducted at market prices, including direct sales to official holders.
Also the gold sales could be conducted on-market in a phased manner over time, and such onmarket gold sales will not add to the announced volume of official sales, it said.
IMF said in a statement the sales would be in a volume strictly limited to 403.3 tonnes, with these sales to be conducted under modalities that safeguard against disruption of the gold market.
The IMF said the decision was a central element of a new income model for the institution that had been approved by the executive board in April 2008.
The Group of 20 developed and developing countries decided at their April summit in London that the money raised by the gold sales should allow the IMF to offer favorable conditions on loans to the poorest countries.
The IMF said the sale of gold will also increase the fund’s resources for lending to low-income countries, a strategy that won board backing in July.
The amount of gold is one-eighth of the current holdings of the Washington-based IMF, one of the world’s biggest holders of the precious metal.
The IMF did not state the value of the gold to be sold but based on the current bullish market price for the metal, it is estimated that the sale would fetch 13 billion dollars.
Under the approved plan, the IMF would offer to sell gold directly to central banks or other official sector holders if there were to be interest from such holders.
The IMF said such transactions would redistribute official gold holdings without changing total official holdings.
Under the fund’s Articles of Agreement, all gold sales must be conducted at market prices, including direct sales to official holders.
Also the gold sales could be conducted on-market in a phased manner over time, and such onmarket gold sales will not add to the announced volume of official sales, it said.
Thursday, 30 July 2009
IMF gold sale under new central bank pact only
The International Monetary Fund (IMF) has stepped up lending to low-income countries to combat the impact of the global recession.
According to an announcement on its website, IMF said it has declared a new framework for loans to the world’s poorest nations, including increased resources, a doubling of borrowing limits, zero interest rates until the end of 2011, and more flexible terms.
The IMF’s executive board approved the package of measures that will sharply increase the loan resources available to low-income countries. The resources — including from the planned sale of IMF gold — are expected to boost the IMF’s concessional lending to up to $17 billion through 2014, including up to $8 billion over the next two years.
And, the planned sale of 403 tonnes of IMF gold will take place within a new European central bank gold pact currently being negotiated.
The IMF has provisionally agreed to sell the gold to raise resources for increased lending to poor countries.
A deciding vote by the fund’s 186 member countries is expected before IMF meetings in Istanbul in October, and requires the support of 85 per cent of the membership.
The sales would probably occur all the time within the central bank agreement and could take two to three years before sales are completed.
Negotiations on the new Central Bank Gold Sales Agreement will also be finalized by October. The current 5-year agreement expires in September.
The IMF holds 103.4 million ounces (3,217 tonnes) of gold, which had a market value of about $12 billion as of March 31.
In order to meet the financing needs of the low-income countries during the global crisis, some of the proceeds of those sales will be used to help provide new subsidy resources for the concessional lending to those countries.
Resources linked to the gold sales will be used to help fund concessional lending to low-income countries in the following ways. First, windfall profits when the gold sales take place can be used for the subsidy resources.
Windfall profits would derive from gold sales at an average price in excess of $850 per ounce — that is the price assumed in the new income model as necessary to fund the model. Second, to the extent that the realized windfall profits fall short of the required contribution, the remaining amount will be generated through investment income from the endowment funded by the gold sales.
In addition, the IMF announced zero interest payments up to the end of 2011 for all concessional loans to low-income members and lower interest rates on a permanent basis thereafter. A new set of lending instruments will underpin this increased support.
According to an announcement on its website, IMF said it has declared a new framework for loans to the world’s poorest nations, including increased resources, a doubling of borrowing limits, zero interest rates until the end of 2011, and more flexible terms.
The IMF’s executive board approved the package of measures that will sharply increase the loan resources available to low-income countries. The resources — including from the planned sale of IMF gold — are expected to boost the IMF’s concessional lending to up to $17 billion through 2014, including up to $8 billion over the next two years.
And, the planned sale of 403 tonnes of IMF gold will take place within a new European central bank gold pact currently being negotiated.
The IMF has provisionally agreed to sell the gold to raise resources for increased lending to poor countries.
A deciding vote by the fund’s 186 member countries is expected before IMF meetings in Istanbul in October, and requires the support of 85 per cent of the membership.
The sales would probably occur all the time within the central bank agreement and could take two to three years before sales are completed.
Negotiations on the new Central Bank Gold Sales Agreement will also be finalized by October. The current 5-year agreement expires in September.
The IMF holds 103.4 million ounces (3,217 tonnes) of gold, which had a market value of about $12 billion as of March 31.
In order to meet the financing needs of the low-income countries during the global crisis, some of the proceeds of those sales will be used to help provide new subsidy resources for the concessional lending to those countries.
Resources linked to the gold sales will be used to help fund concessional lending to low-income countries in the following ways. First, windfall profits when the gold sales take place can be used for the subsidy resources.
Windfall profits would derive from gold sales at an average price in excess of $850 per ounce — that is the price assumed in the new income model as necessary to fund the model. Second, to the extent that the realized windfall profits fall short of the required contribution, the remaining amount will be generated through investment income from the endowment funded by the gold sales.
In addition, the IMF announced zero interest payments up to the end of 2011 for all concessional loans to low-income members and lower interest rates on a permanent basis thereafter. A new set of lending instruments will underpin this increased support.
Sunday, 21 June 2009
IMF Gold Sale: WGC welcomes US approval
The World Gold Council (WGC), the apex global body on gold, has welcomed the US Congress approval to the gold sale plan from the International Monetary Fund (IMF).
Last week, the US House of Representatives approved an agreement to allow US members of the IMF board to agree the proposed $13 billion sale of 400 tonnes of IMF gold to shore up its finances.
In a statement, Aram Shishmanian, the WGC's chief executive welcomed the US Congress approval to the IMF gold sale plan. "We are pleased to see that the IMF's plan to sell gold in a structured and non-disruptive manner has gone through due political process without problem, which is a credit to the responsible behaviour of all parties involved in the process," said the statement.
WGC said the IMF gold sale will not constitute any net addition to the amount of gold the market is already expecting from official sector sources as a whole, and therefore we anticipate zero market impact. We believe this announcement, if anything, will lead to positive sentiment among market participants as it clarifies that there will be no net addition to overall gold supply.
Shishmanian said: "In these times of financial instability, gold's universal role as protector of wealth has come to the fore, not least as a crucial part of reserve asset portfolios. The fact that these sales will effectively rescue the IMF from a difficult situation regarding its own finances is proof of gold's unique investment characteristics, long-recognised by central bankers and institutional and retail investors alike."
Given the IMF's status as "a lender of last resort", the WGC believes it is imperative that the organisation continues to hold large gold reserves and acknowledges the IMF's public declarations that: "The IMF should continue to hold a relatively large amount of gold among its assets, not only for prudential reasons, but also to meet unforeseen contingencies."
The US approval to the IMF gold sale plan has been tied to the Military Supplemental Bill which covered additional funding for the Iraq and Afghanistan conflicts for the U.S forces.
While the bill itself does not specifically tie the IMF sales to an orderly sales programme, the IMF has stated publicly that any such sales should be made in co-ordination with current and future Central Bank Gold Sales Agreements whereby signatories have to agree to limit total annual sales to less than a specific volume (currently 500 tonnes).
Last week, the US House of Representatives approved an agreement to allow US members of the IMF board to agree the proposed $13 billion sale of 400 tonnes of IMF gold to shore up its finances.
In a statement, Aram Shishmanian, the WGC's chief executive welcomed the US Congress approval to the IMF gold sale plan. "We are pleased to see that the IMF's plan to sell gold in a structured and non-disruptive manner has gone through due political process without problem, which is a credit to the responsible behaviour of all parties involved in the process," said the statement.
WGC said the IMF gold sale will not constitute any net addition to the amount of gold the market is already expecting from official sector sources as a whole, and therefore we anticipate zero market impact. We believe this announcement, if anything, will lead to positive sentiment among market participants as it clarifies that there will be no net addition to overall gold supply.
Shishmanian said: "In these times of financial instability, gold's universal role as protector of wealth has come to the fore, not least as a crucial part of reserve asset portfolios. The fact that these sales will effectively rescue the IMF from a difficult situation regarding its own finances is proof of gold's unique investment characteristics, long-recognised by central bankers and institutional and retail investors alike."
Given the IMF's status as "a lender of last resort", the WGC believes it is imperative that the organisation continues to hold large gold reserves and acknowledges the IMF's public declarations that: "The IMF should continue to hold a relatively large amount of gold among its assets, not only for prudential reasons, but also to meet unforeseen contingencies."
The US approval to the IMF gold sale plan has been tied to the Military Supplemental Bill which covered additional funding for the Iraq and Afghanistan conflicts for the U.S forces.
While the bill itself does not specifically tie the IMF sales to an orderly sales programme, the IMF has stated publicly that any such sales should be made in co-ordination with current and future Central Bank Gold Sales Agreements whereby signatories have to agree to limit total annual sales to less than a specific volume (currently 500 tonnes).
Sunday, 7 June 2009
How many times did IMF sell gold since 1950?
The International Monetary Fund (IMF) holds 103.4 million ounces (3,217 metric tons) of gold at designated depositories. The IMF’s total gold holdings are valued on its balance sheet at SDR 5.9 billion (about $8.7 billion) on the basis of historical cost. As of March 31, 2009, the IMF's holdings amounted to $94.8 billion (at then current market prices).
A portion of these holdings were acquired since the Second Amendment of the IMF’s Articles of Agreement in April 1978, amounting to 12.97 million ounces (403.3 metric tons), with a market value of $11.9 billion as of March 31, 2009. As noted below, this part of the Fund’s gold holdings is not subject to restitution to members.
The IMF acquired the majority of its gold holdings prior to the Second Amendment through four main types of transactions. First, it was then prescribed that 25 percent of initial quota subscriptions and subsequent quota increases were to be paid in gold. This represented the largest source of the IMF's gold. Second, all payments of charges (i.e., interest on members' use of IMF credit) were normally made in gold. Third, a member wishing to purchase the currency of another member could acquire it by selling gold to the IMF. The major use of this provision was sales of gold to the IMF by South Africa in 1970-71. And finally, members could use gold to repay the IMF for credit previously extended.
The IMF's policy on gold today
The Second Amendment to the Articles of Agreement in April 1978 eliminated the use of gold as the common denominator of the post-World War II exchange rate system and as the basis of the value of the Special Drawing Right (SDR). It also abolished the official price of gold and brought to an end the obligatory use of gold in transactions between the IMF and its members. It furthermore required that the IMF, when dealing in gold, avoid managing its price or establishing a fixed price.
The Articles of Agreement now limit the use of gold in the IMF's operations and transactions. The IMF may sell gold outright on the basis of prevailing market prices, and may accept gold in the discharge of a member's obligations at an agreed price, based on market prices at the time of acceptance. These transactions in gold require an 85 percent majority of total voting power. The IMF does not have the authority to engage in any other gold transactions—such as loans, leases, swaps, or use of gold as collateral—nor does it have the authority to buy gold.
The Articles also provide for the restitution of the gold the Fund held on the date of the Second Amendment to members of the Fund as of August 31, 1975. Restitution would involve the sale of gold to this group of members at the former official price of SDR 35 per ounce, with such sales made to those members who agree to buy it in proportion to their quotas on the date of the Second Amendment. A decision to restitute gold requires support from an 85 percent majority of the total voting power. The Articles do not provide for the restitution of gold the Fund has acquired after the date of the Second Amendment.
The IMF's policy on gold is governed by the following principles:
• As an undervalued asset held by the IMF, gold provides fundamental strength to its balance sheet. Any mobilization of IMF gold should avoid weakening its overall financial position.
• The IMF should continue to hold a relatively large amount of gold among its assets, not only for prudential reasons, but also to meet unforeseen contingencies.
• The IMF has a systemic responsibility to avoid causing disruptions to the functioning of the gold market.
• Profits from any gold sales should be used whenever feasible to create an investment fund, of which only the income should be used.
How and when the IMF used gold
Outflows of gold from the IMF's holdings occurred under the original Articles of Agreement through sales of gold for currency, and via payments of remuneration and interest. As noted, since the Second Amendment of the Articles of Agreement, outflows of gold can only occur through outright sales. Key gold transactions included:
• Sales for replenishment (1957-70). The IMF sold gold on several occasions to replenish its holdings of currencies.
• South African gold (1970-71). The IMF sold gold to members in amounts roughly corresponding to those purchased from South Africa during this period.
• Investment in U.S. government securities (1956-72). In order to generate income to offset operational deficits, some IMF gold was sold to the United States and the proceeds invested in U.S. government securities. Subsequently, a significant buildup of IMF reserves prompted the IMF to reacquire this gold from the U.S. government.
• Auctions and "restitution" sales (1976-80). The IMF sold approximately one third (50 million ounces) of its then-existing gold holdings following an agreement by its members to reduce the role of gold in the international monetary system. Half of this amount was sold in restitution to members at the then-official price of SDR 35 per ounce; the other half was auctioned to the market to finance the Trust Fund, which supported concessional lending by the IMF to low-income countries.
• Off-market transactions in gold (1999-2000). In December 1999, the Executive Board authorized off-market transactions in gold of up to 14 million ounces to help finance the IMF's participation in the Heavily Indebted Poor Countries (HIPC) Initiative.
Between December 1999 and April 2000, separate but closely linked transactions involving a total of 12.9 million ounces of gold were carried out between the IMF and two members (Brazil and Mexico) that had financial obligations falling due to the IMF. In the first step, the IMF sold gold to the member at the prevailing market price and the profits were placed in a special account invested for the benefit of the HIPC Initiative.
In the second step, the IMF immediately accepted back, at the same market price, the same amount of gold from the member in settlement of that member's financial obligations. In the end, these transactions left balance of the IMF's holdings of physical gold unchanged.
Courtesy: Reproduced from the International Monetary Fund web site
A portion of these holdings were acquired since the Second Amendment of the IMF’s Articles of Agreement in April 1978, amounting to 12.97 million ounces (403.3 metric tons), with a market value of $11.9 billion as of March 31, 2009. As noted below, this part of the Fund’s gold holdings is not subject to restitution to members.
The IMF acquired the majority of its gold holdings prior to the Second Amendment through four main types of transactions. First, it was then prescribed that 25 percent of initial quota subscriptions and subsequent quota increases were to be paid in gold. This represented the largest source of the IMF's gold. Second, all payments of charges (i.e., interest on members' use of IMF credit) were normally made in gold. Third, a member wishing to purchase the currency of another member could acquire it by selling gold to the IMF. The major use of this provision was sales of gold to the IMF by South Africa in 1970-71. And finally, members could use gold to repay the IMF for credit previously extended.
The IMF's policy on gold today
The Second Amendment to the Articles of Agreement in April 1978 eliminated the use of gold as the common denominator of the post-World War II exchange rate system and as the basis of the value of the Special Drawing Right (SDR). It also abolished the official price of gold and brought to an end the obligatory use of gold in transactions between the IMF and its members. It furthermore required that the IMF, when dealing in gold, avoid managing its price or establishing a fixed price.
The Articles of Agreement now limit the use of gold in the IMF's operations and transactions. The IMF may sell gold outright on the basis of prevailing market prices, and may accept gold in the discharge of a member's obligations at an agreed price, based on market prices at the time of acceptance. These transactions in gold require an 85 percent majority of total voting power. The IMF does not have the authority to engage in any other gold transactions—such as loans, leases, swaps, or use of gold as collateral—nor does it have the authority to buy gold.
The Articles also provide for the restitution of the gold the Fund held on the date of the Second Amendment to members of the Fund as of August 31, 1975. Restitution would involve the sale of gold to this group of members at the former official price of SDR 35 per ounce, with such sales made to those members who agree to buy it in proportion to their quotas on the date of the Second Amendment. A decision to restitute gold requires support from an 85 percent majority of the total voting power. The Articles do not provide for the restitution of gold the Fund has acquired after the date of the Second Amendment.
The IMF's policy on gold is governed by the following principles:
• As an undervalued asset held by the IMF, gold provides fundamental strength to its balance sheet. Any mobilization of IMF gold should avoid weakening its overall financial position.
• The IMF should continue to hold a relatively large amount of gold among its assets, not only for prudential reasons, but also to meet unforeseen contingencies.
• The IMF has a systemic responsibility to avoid causing disruptions to the functioning of the gold market.
• Profits from any gold sales should be used whenever feasible to create an investment fund, of which only the income should be used.
How and when the IMF used gold
Outflows of gold from the IMF's holdings occurred under the original Articles of Agreement through sales of gold for currency, and via payments of remuneration and interest. As noted, since the Second Amendment of the Articles of Agreement, outflows of gold can only occur through outright sales. Key gold transactions included:
• Sales for replenishment (1957-70). The IMF sold gold on several occasions to replenish its holdings of currencies.
• South African gold (1970-71). The IMF sold gold to members in amounts roughly corresponding to those purchased from South Africa during this period.
• Investment in U.S. government securities (1956-72). In order to generate income to offset operational deficits, some IMF gold was sold to the United States and the proceeds invested in U.S. government securities. Subsequently, a significant buildup of IMF reserves prompted the IMF to reacquire this gold from the U.S. government.
• Auctions and "restitution" sales (1976-80). The IMF sold approximately one third (50 million ounces) of its then-existing gold holdings following an agreement by its members to reduce the role of gold in the international monetary system. Half of this amount was sold in restitution to members at the then-official price of SDR 35 per ounce; the other half was auctioned to the market to finance the Trust Fund, which supported concessional lending by the IMF to low-income countries.
• Off-market transactions in gold (1999-2000). In December 1999, the Executive Board authorized off-market transactions in gold of up to 14 million ounces to help finance the IMF's participation in the Heavily Indebted Poor Countries (HIPC) Initiative.
Between December 1999 and April 2000, separate but closely linked transactions involving a total of 12.9 million ounces of gold were carried out between the IMF and two members (Brazil and Mexico) that had financial obligations falling due to the IMF. In the first step, the IMF sold gold to the member at the prevailing market price and the profits were placed in a special account invested for the benefit of the HIPC Initiative.
In the second step, the IMF immediately accepted back, at the same market price, the same amount of gold from the member in settlement of that member's financial obligations. In the end, these transactions left balance of the IMF's holdings of physical gold unchanged.
Courtesy: Reproduced from the International Monetary Fund web site
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