Questions and Answers
IMF Gold Sales
Last Updated: September 18, 2009
On September 18, 2009, the IMF's Executive Board approved gold sales strictly limited to 403.3 metric tons, representing one eighth of the Fund's total holdings.
Q. How much gold will be sold?
• The Executive Board approved sales strictly limited to the gold the IMF has acquired after the Second Amendment of the Articles of Agreement in April 1978. This amounts to 12,965,649 fine troy ounces or 403.3 metric tons, which represents one-eighth of the Fund's total holdings.
• The volume of gold sales approved by the Executive Board is unchanged from the proposed sales in the new income model endorsed by the Executive Board in April 2008, which was also the same volume as recommended by the Crockett Committee in its January 2007 report on the sustainable long-term financing of the IMF.
Q. When will the gold sales take place?
• According to the modalities for the gold sales adopted by the Executive Board, the Fund will first stand ready to sell gold directly to central banks or other official sector holders if there were to be interest from such holders. Such off-market sales would be conducted at market prices.
• Second, the gold sales could be conducted on-market in a phased manner over time, following the approach adopted successfully by the central banks participating in the Central Bank Gold Agreement (CBGA).
• Participants in the recently renewed CBGA have announced ceilings on sales of 400 tons annually, and 2,000 tons in total during the five years starting on September 27, 2009, and noted that the Fund's sales can be accommodated under these ceilings.
• As one of the elements of transparency in the sales, the Fund will inform markets before any on market sales commence.
Q. Why has the IMF decided to sell gold?
• The strictly limited sales of Fund gold approved by the Executive Board will help put the financing of the IMF on a sound long-term footing, and also help to boost the Fund's capacity to provide concessional loans to low income countries.
• New income model: an endowment funded with the profits from gold sales is a central component of the new income model that the Board endorsed in April 2008. The new income model would provide more diverse income sources that are better aligned with the variety of functions performed by the Fund.
• Concessional lending: Resources linked to the gold sales will also be used indirectly to increase the Fund's capacity to provide concessional loans to low-income countries.
Q. At what price does the IMF expect to sell the gold?
• Under the Fund's Articles of Agreement, all gold sales must be conducted at market prices, including direct sales to official holders. Hence, the Fund will sell gold at the market price when the sales are conducted.
• When the new income model was endorsed by the Executive Board in April 2008, the price assumed for the purpose of making medium-term income projections was $850 per ounce, which was based on current and historical developments in gold prices at that time. However, in practice, the price realized for the proposed sales may be above or below this assumption depending on market developments.
Q. How will disruption of the gold market be avoided?
• 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. Hence, the Executive Board has adopted modalities for the gold sales consistent with guidelines it endorsed in February 2008 to safeguard against market disruption:
- 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).
- The Fund's gold sales should not add to the announced volume of sales from official sources. (Participants in the recently renewed Central Bank Gold Agreement noted that the Fund's sales can be accommodated under the announced ceilings, ensuring that on-market gold sales by the Fund would not add to the announced volume of sales from official sources.)
- The scope for sales of gold to one or more official holders should be explored. This would be advantageous because such transactions would redistribute official gold holdings without changing total official holdings. There would also be the practical advantage that the Fund could receive sales proceeds earlier, thereby beginning to generate income from an endowment sooner.
- Absent sufficient interest from other official holders to purchase gold directly from the Fund, phased on-market sales would represent the most appropriate modality for potential gold sales. This would follow the approach adopted successfully over a number of years by current Central Bank Gold Agreement participants.
- 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.
Q. Where can more information about the IMF gold be obtained?
• Read more about the IMF's gold in the factsheet Gold in the IMF.