''Midas'' commentary for February 4 posted in the clear at GoldSeek

Section:

G7 Mulls IMF Gold Sales to Help Poor

By Katie Allen
Reuters
Saturday, February 5, 2005

http://www.reuters.com/newsArticle.jhtml?
type=businessNews&storyID=7547548

LONDON -- The International Monetary Fund will look into using its
huge gold reserves to help finance debt relief for the world's
poorest countries on the urging of the Group of Seven rich nations,
ministers said on Saturday.

Finance chiefs from the G7 in their communique issued at the end of
the two-day meeting said IMF managing director Rodrigo Rato will look
at proposals to revalue or sell gold reserves to offer debt relief to
alleviate global poverty.

"I believe this is the first time there has been a mention of the use
of gold in a G7 communique for achieving debt relief," said British
finance minister Gordon Brown, who hosted the two-day meeting in
London.

He said gold sales as well as revaluations would be investigated and
Rato would report back in April, when the IMF meets in Washington.

"To finance the relief of debts owed to the IMF and to enable the
Fund to continue to play a role in the poorest countries, the
Managing Director has stated that he will bring forward proposals ...
covering the Fund's gold and other resources and in an orderly way,"
the communique said.

Rato said on Friday there are clear ways to sell gold effectively if
IMF shareholders decide to proceed. But he stressed he was not
providing an opinion.

"Certainly we have done it before and we think there are clear ways
to do it that will be the most effective from a financial point of
view," he said at the London meeting.

The world's poorest nations owe $12 billion to the IMF, Brown said.
Overall, sub-Saharan Africa owes some $70 billion to multilateral
lenders, and developing countries say repayments are crippling them
by diverting funds from education and health care.

Brown has made debt relief the centerpiece of Britain's 2005
presidency of the Group of Eight, which includes the G7 nations
France, Italy, Canada, Germany, Japan, and the United States as well
as Russia.

He first proposed revaluing IMF gold stocks with off-market sales
last year. Under a 1971 agreement, most IMF gold is valued at $40 to
$50 an ounce, or about one-tenth of current market prices. The fund
holds 103.4 million ounces of gold.

Brown has said revaluing the gold could free up billions of dollars
to ease debt burdens on the world's poor.

But U.S. Treasury Under Secretary John Taylor said the United States
had other plans for alleviating poverty.

Asked about using IMF gold stocks he said: "The United States is not
convinced that's the necessary way to do it."

The United States has a de-facto veto power on IMF gold sales because
of its voting weight at the fund.

Leading gold producer Canada was cautious in its support.

"If a technical answer can be found that does not compromise the
IMF's integrity, we are prepared to go with it," said Canadian
Finance Minister Ralph Goodale after the London talks.

But the plan received key backing from the world's largest gold
producer, South Africa, although Finance Minister Trevor Manuel
cautioned there must be a rational approach to sales.

"Unless we manage this process, you might have disruptive sales,
which will have disastrous consequences for gold-producing
countries," he told Reuters on the sidelines of the G7 talks.

He suggested staggered sales to ensure market stability.

"I would rather have an arrangement where we agree to sell, agree to
order, agree to a queuing system. I would be happy to have the IMF
have some preference in that queue so that we don't impede the debt
relief," he said.

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