Philip Klapwijk, GFMS
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IMF gold sales seen winning US support
Allan Seccombe
Posted: Tue, 08 Apr 2008

[miningmx.com] -- THE once-off sale of 403 tonnes of gold by the International Monetary Fund to bolster its funds is more than likely to go ahead and is not seen to have much impact on the global gold market, said GFMS chairman Philip Klapwijk.

The IMF, in a well telegraphed move, said it was selling the gold to create an endowment with the profits from the sale, which would be held in a “transparent manner with strong safeguards to ensure they do not add to official sales and avoid an risk of market disruption,” said managing director Dominique Strauss-Kahn.

The gold price barely twitched on the news. The gold price was steady above $920/oz and was last at $922/oz.
We bet these sales will be approved
The facts that it still has to clear the American political system – something which could take a while – and the IMF’s commitment to not disrupt the gold market with the sales over several years soothed market worries. The IMF has 3,217 tonnes of gold or 103.4 million oz worth $95.3bn.

“Given that it’s going to be spread over a number of years and the market is used to 500 tonnes or so coming from Central Bank Gold Agreement countries every year this is not a major dent to sentiment as we can see by the price reaction,” said Klapwijk, the executive chairman of GFMS.

“I’m not in the slightest bit surprised the IMF came out with this statement. We certainly thought it was on the cards they would follow the advice of their expert group, which recommended gold sales,” he told Miningmx.

The expert group looked at ways to turning the financial position of the IMF around and the Executive Board of the Fund drew heavily on the recommendations from the group in putting together a new income and expenditure framework.

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There is a $400m gap between income and expenditure at the IMF, which Strauss-Kahn said could be closed within a “few years”.

Strauss-Kahn pointed out the US Congress needed to approve the IMF’s gold sales before that country’s executive director at the IMF could vote in favour of the move.

The US holds a blocking vote in the IMF and has in the past opposed gold sales that were suggested to relieve the debt burdens of highly indebted poor countries.

The need for funding through gold sales has been raised by the IMF a number of times since 2001, with the US last blocking these plans in 2005, said Ross Norman, from TheBullionDesk.com in London.

The market expects the approval will be granted, said Klapwijk.

“The gold sales, if they fit within the US agenda for reform of the IMF’s finances, would be something the US administration would support, and, indeed, the US administration is on record as supporting IMF gold sales this time, in contrast to previous occasions,” he said.

“You will obviously get some debate going within Congress, but I would think there’s a fair chance this could get through. It could be a post-election process, I don’t know,” he said.

“Our bet is that, given the rest of the world is on board and the administration backs the programme, these sales will be approved,” he added.

The sales, far from being a bane for the market, would most likely be welcomed, Norman said.

“Gold mine production is failing to keep up with burgeoning investment demand and the supply deficit has already seen a quadrupling of prices since Gordon Brown, former UK chancellor sold precisely the same tonnage in 2001,” he said.