Gold News

IMF past & future gold sales

In the unlikely event that the sales were to come to pass, what would the procedure be...?

Gold Forecaster: Global Watch, 9th February 2007
Below is a snippet from the latest weekly issue from

PROPOSALS HAVE BEEN PUT FORWARD to sell 400 tonnes of gold from the IMF holdings. The extra money is needed to help plug an estimated shortfall of $400m a year in the IMF's current income and expenses by 2010.

   The IMF has 3,217 metric tons of gold and the sale of 400 tonnes could raise $8.4 billion at current market prices. The committee's key recommendations involve creating an endowment from "limited" IMF gold sales.

   "The limited sale of the IMF gold should be ring-fenced to exclude further sales and subject to strong safeguards to limit their market impact. Of its total stock of 3,217 metric tonnes of gold, the IMF could sell the gold sold and repurchased in the 1999-2000 off-market operations. This gold, which amounts to about 400 tonnes, has an approximate current market value of S.D.R. 4.4 billion ($6.6 billion). Investment of profits from its sale could yield a real return of some S.D.R. 130 million ($195 million) a year.”

   The reason this particular gold was defined is that having been sold by Mexico and Brazil, its ownership can no longer be linked to an individual member, but lies in the ownership of all the members of the IMF as a whole. Perhaps the committee felt that the members would not be so attached to this gold as much as they would their own gold?

   But in the unlikely event that the sales were to come to pass, what would the procedure be?

   The Articles of Agreement limit the use of gold in the IMF's operations and transactions as follows:

  • Transactions in gold require an 85% majority of total voting power. 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 on the basis of prices in the market at the time of acceptance.
  • It does not, however, have the authority to engage in any other gold transactions, e.g., loans, leases, swaps, or use of gold as collateral, nor does it have the authority to buy gold.

   The wording of the recommendations is critical for the potential modus operandi and these leave a great deal of scope for interpretation, so the pattern set by past sales and objections to gold sales by Central Bankers will guide us to possible future events.

Past Sales & Objections

   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. Sales of gold for currency were as follows:

  • Sales for replenishment (1957-70). In the late 1950s and in the 1960s, the IMF sold gold on several occasions to replenish its holdings of currencies.


  • Investment in US government securities (1956-72). In order to generate income to offset operational deficits, some gold was sold to the United States and the proceeds invested in US government securities. A significant buildup of reserves through income from charges prompted the IMF to reacquire this gold from the US government in the early 1970s.


  • South African gold and mitigation. In the early 1970s, the IMF sold gold to members in amounts roughly corresponding to the amounts purchased earlier from South Africa. It also sold gold in connection with payments of gold for quota increases by some members, in order to mitigate the impact of these payments on the gold holdings of reserve centers.

   Thereafter the US and the IMF decided gold’s role in the monetary system was to be considerably lessened. This allowed the $ to become the currency of oil and the new global reserve currency. Subsequent sales of gold should be seen in that light.

  • Auctions and "restitution" sales
    (1976-80). The IMF sold approximately one-third or 1,555 tonnes of gold (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. These auctions were oversubscribed to the extent that the IMF realized their efforts to discredit gold were not meeting with the success they had hoped for. Hence these sales were terminated.


  • Off-market transactions in gold
    . In December 1999, the Executive Board authorized off-market transactions in gold of up to 14 million ounces to help finance IMF participation in the HIPC Initiative, the scheme whereby poor countries debt would be written off. We cannot find evidence that these sales actually took place?

   Between December 1999 and April 2000, separate but closely linked transactions involving a total of 400 tonnes [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 But this was not a sale into the open market, but an “internal sale”. 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 and then 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 falling due to the Fund. The net effect of these transactions was to leave the balance of the IMF' holdings of physical gold unchanged.

New Sales?

   So what of new potential sales? Please subscribe to for the entire report.

JULIAN PHILLIPS – one half of the highly respected team at – began his career in the financial markets back in 1970, when he left the British Army after serving as an Officer in the Light Infantry in Malaya, Mauritius, and Belfast.

First he worked in Timber Management and then joined the London Stock Exchange, qualifying as a member and specializing from the beginning in currencies, gold and the "Dollar Premium". On moving to South Africa, Julian was appointed a macro-economist for the Electricity Supply Commission – guiding currency decisions on the multi-billion foreign Loan Portfolio – before joining Chase Manhattan and the UK Merchant Bank, Hill Samuel, in Johannesburg.

There he specialized in gold, before moving to Capetown, where he established the Fund Management department of the Board of Executors. Julian returned to the "Gold World" over two years ago, contributing his exceptional experience and insights to Global Watch: The Gold Forecaster.

Legal Notice/Disclaimer: This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold Forecaster/Julian D.W. Phillips have based this document on information obtained from sources they believe to be reliable but which it has not independently verified; they make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster/Julian D.W. Phillips only and are subject to change without notice. They assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, they assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this report.

See full archive of Julian Phillips.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn



Market Fundamentals