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IMF can't explain gold sales now without revealing squeeze

Section: Daily Dispatches

By Adrian Douglas
Thursday, May 6, 2010

The bailout package for Greece is $146 billion offered jointly by the International Monetary Fund (IMF) and the European Union (EU). If the IMF is taking half the responsibility for this loan package, it is on the hook for $73 billion.

The IMF's sale of 212 tonnes of gold in 2009 to India, Sri Lanka, and Mauritius netted $7.1 billion. So to raise all the IMF's share of the Greek bailout package, the IMF would have to sell a further 1,773 tonnes or 59 percent of IMF gold reserves. If the IMF subsequently has to bail out Spain or Portugal, it would then have no gold at all.

But this is just hypothetical because the IMF doesn't have 3,005 tonnes of gold to sell. It has only 168 tonnes, which is what remains from the 403 tonnes it declared it was selling in 2009. This gold is what the IMF claims it earned through transactions it made after the Second Amendment to its Articles in 1978. The IMF is authorized to sell only this gold, and the IMF's Internet site shows that this is the only gold it actually has.

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GATA has long maintained that the IMF has little to no gold. It has only pledges of gold that are part of the central bank gold reserves of IMF member countries. This view is supported by the inability of the IMF in 2008 to tell GATA Secretary/Treasurer Chris Powell exactly where the IMF's gold is stored and if it is audited. (See Business Insider's Vince Veneziani was also stonewalled when he recently asked the IMF about the whereabouts of its gold. (See

The IMF Internet site notes that the gold that had been pledged to the IMF before the Second Amendment, approximately 2,800 tonnes is subject to "restitution" to the IMF's founding members. (See

"Restitution. The Articles also provide for the restitution of the gold the Fund held on the date of the Second Amendment (April 1978) to those countries that were members of the Fund as of August 31, 1975. Restitution would involve the sale of gold to this group of member countries at the former official price of SDR [Special Drawing Rights] 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 former official price of SDR 35/oz equates today to about $68/oz. So this means that however you look at it, the IMF has no gold. IMF member countries pledged gold to the IMF and at any time they can buy it back for $68/oz.

Yes, restitution of the gold requires an 85 percent majority vote at the IMF, but would anyone vote against buying gold at $68/oz?

This means that there is no way that the 2,800 tonnes of gold the IMF was pledged before the Second Amendment will ever be sold by the IMF to anyone except the member countries that pledged it.

So how could anyone think that the original gold ever physically changed geographic location?

The gold almost certainly has been left in IMF member central bank vaults and double-counted, first as IMF member gold reserves and then as the IMF's own gold reserves.

Is this just guesswork? Absolutely not. In February 2008 the IMF approved gold sales guidelines that are explained at the IMF's Internet site:

"The IMF's Executive Board has reaffirmed the long-standing principle that the Fund has a systemic responsibility to avoid causing disruptions that would adversely affect gold holders and gold producers, as well as the functioning of the gold market. To that end, in February 2008, the Board endorsed the following guidelines to govern the envisaged gold sales:

"(i) Sales should be strictly limited to the amount of gold that the Fund has acquired since the Second Amendment of the Articles of Agreement (12,965,649 fine troy ounces or 403.3 metric tons, which represent one-eighth of the Fund's total holdings)."[Emphasis added.]

So by its own executive board resolution the IMF cannot sell any gold beyond the 403.3 tonnes it has already announced, leaving the only possible method of disposal of the remaining 2,800 tonnes as a resale to the founding members at the original Special Drawing Right price.

IMF gold is clearly just a ledger entry.

The 403 tonnes that the IMF obtained since the Second Amendment probably is real gold and that explains why the IMF was obliged to sell it: Because the Western central banks and their bullion bank cartel allies are desperate for liquidity to keep their gold price suppression scheme going. Once that 403 tonnes are gone, there is no more gold available from the IMF. And the IMF's balance sheet can be squared away with just $6.9 billion to cancel out those 2,800 tonnes of ledger-entry gold if at any point the IMF wishes to do so.

It is comical that the IMF's gold sales were spun as a way to raise money to set up an endowment fund that could be a better-performing asset than gold itself, which generates no income stream. So what is in the endowment fund that will perform better than 200 tonnes of gold?

Greek bonds!

The IMF must have got investment advice from Gordon Brown on that one.

In a dispatch on May 4 GATA reported that the World Gold Council (WGC) had discovered that the IMF sold 5.6 tonnes of gold in February and 18.5 tonnes in March. This was discovered by the WGC staff examining the monthly financial statements of the IMF. This is astonishing news.

The IMF has always announced at least 500 times its vague determinations that it might want to sell gold, and when it decided to actually sell 403.3 tonnes this too was announced many times, followed by an announcement of the approval to do so then, followed by the announcements it had actually sold gold to India, Sri Lanka, and Mauritius.

Suddenly in complete contrast the IMF now is apparently selling gold in large amounts in total silence. This even appears to contravene the IMF Executive Board's guidelines approved in February 2008, which state:

"(v) A strong governance and control framework, together with a high degree of transparency, would be essential for gold sales conducted by the Fund. A clear, transparent communications strategy, including regular external reporting on sales, should be adopted, in order to assure markets that the gold sales are being conducted in a responsible manner."

So why has the IMF not followed its own guidelines? Why is the IMF not announcing these sales multiple times as before?

My interpretation is that such announcements now would require the IMF to report to whom the gold has been sold. I believe that the bullion banks are having trouble meeting surging demand for real metal. Some of this demand has been stimulated by GATA's recent revelations about how the London Bullion Market Association's OTC market operates on a fractional reserve basis, where much more gold is sold than could possibly be delivered.

If this is the case, it is clear that the IMF would not announce who received the gold, just as the Federal Reserve refuses to reveal which banks received TARP money.

If my interpretation is correct, the IMF's sudden silence about the disposal of its gold is another indication that a short squeeze of epic proportions is fast approaching. This would fit with the extensive market study made for GATA by Frank Veneroso in 2000 that concluded that the Western central banks would deplete their gold available for suppressing the market in seven to 10 years.


Adrian Douglas is publisher of the Market Force Analysis letter ( and a member of GATA's Board of Directors.

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