IMF Survey: IMF ‘On-Market’ Gold Sales Move Ahead

IMF News, February 17, 2010

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Following the sale of 212 tons of gold to central banks, the IMF is moving ahead with sales on the gold market, phasing the sales so as to avoid market disruption.
The IMF announced last year its intentions to sell just over 403 metric tons of gold.
In September 2009, the IMF’s Executive Board approved gold sales totaling 403.3 metric tons (12,965,649 troy ounces).
The sale of the full 403.3 metric tons would reduce the IMF’s gold holdings by about one-eighth.
The IMF will continue to hold a substantial portion of its assets in gold.

Amount sold to central banks to date: 212 tons.
Proceeds from sales to date: almost $7.2 billion, or just over SDR 4.5 billion.
Sales to central banks were conducted at market prices and allocated on a first-come, first-served basis to three central banks that expressed interest.
The period set aside exclusively for official sales is now over; the IMF remains ready to respond to interest in gold from official holders.
Sales will now include on-market transactions conducted in a phased way to avoid market disruption.

200-ton sale to the Reserve Bank of India generated proceeds equivalent to $6.7 billion or SDR 4.2 billion.
Daily sales for the 200-ton transaction took place over a two-week period from October 19–30, 2009, to protect both parties against short-term fluctuations in gold prices.
Sales of gold to the Bank of Mauritius and the Central Bank of Sri Lanka were each conducted on a single day, November 11 and 23 respectively.
Proceeds from Bank of Mauritius sale: $72 million (SDR 45 million).
Proceeds from Central Bank of Sri Lanka sale: $375 million (SDR 234 million).

Total limit of sales: strictly limited to 403.3 tons, approved on September 18, 2009.
Key to new income model:
- Based on recommendations of the Committee of Eminent Persons chaired by Andrew Crockett to reduce the Fund’s reliance on lending income to cover administrative expenses.
- Aim: diversify IMF income sources and better align them with the variety of functions performed by the Fund.
- A key element is the creation of an endowment with the profits from gold sales, which would be invested in a manner consistent with the public nature of these funds.
Low-income countries to benefit:
- In 2009, the IMF agreed to mobilize $17 billion through 2014 for lending to low-income countries.
- A financing package, which includes resources linked to these gold sales, has been agreed upon and will generate the additional new subsidy resources of SDR 1.5 billion needed to help cover the cost of further low-interest lending by the Fund.

A high degree of transparency will continue during the IMF’s gold sales to assure markets that the sales are being conducted in a responsible manner.
The IMF publicly announced each official sale shortly after the transaction was concluded.
The volume of IMF gold holdings will be reported on a monthly basis through the International Financial Statistics.
The IMF’s quarterly financial statements will provide additional disclosures.

Top priority: avoid disruption to the gold market.
Prior to any sales on the gold market, sales were first made exclusively to interested central banks, shifting gold within the official sector.
On-market sales will be phased over time following the approach used successfully by the central banks participating in the Central Bank Gold Agreement.

IMF Survey online — February 17, 2010