Monday, August 29, 2011

IMF - Gold in the IMF

IMF Factsheet: Gold in the IMF

April 2011

"Gold played a central role in the international monetary system until the collapse of the Bretton Woods system of fixed exchange rates in 1973. Since then, the role of gold has been gradually reduced. However, it is still an important asset in the reserve holdings of a number of countries, and the IMF remains one of the largest official holders of gold in the world. Consistent with the new income model for the Fund agreed in April 2008, on September 18, 2009, the IMF Executive Board approved gold sales strictly limited to 403.3 metric tons, representing one-eighth of the Fund’s total holdings of gold at that time. Resources linked to these gold sales will also help boost the Fund’s concessional lending capacity. The approved sales program was completed in late December 2010."

How the IMF acquired its gold holdings
"The IMF held 90.5 million ounces (2,814.1 metric tons) of gold at designated depositories at end March 2011. The IMF’s total gold holdings are valued on its balance sheet at SDR 3.2 billion (about $5 billion) on the basis of historical cost. As of March 31, 2011, the IMF's holdings amounted to $130.2 billion at current market prices...."

The IMF’s legal framework for gold
Role of gold. The Second Amendment to the Articles of Agreement in April 1978 fundamentally changed the role of gold in the international monetary system by eliminating the use of gold as the common denominator of the post-World War II exchange rate system and as the basis of the value of the Special Drawing Right (SDR). It also abolished the official price of gold and ended the obligatory use of gold in transactions between the IMF and its member countries. It furthermore required that the IMF, when dealing in gold, avoid managing its price or establishing a fixed price.
Transactions. Following the Second Amendment, the Articles of Agreement limit the use of gold in the IMF’s operations and transactions. The IMF may sell gold outright on the basis of prevailing market prices, and may accept gold in the discharge of a member country's obligations (loan repayment) at an agreed price, based on market prices at the time of acceptance. Such transactions require Executive Board approval by an 85 percent majority of the total voting power. The IMF does not have the authority under its Articles to engage in any other gold transactions—such as loans, leases, swaps, or use of gold as collateral—nor does it have the authority to buy gold.

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 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 acquired by the IMF after the date of the Second Amendment.

How and when the IMF has used gold in the past
  • Sales for replenishment (1957–70).
  • South African gold (1970–71).
  • Investment in U.S. government securities (1956–72).
  • Auctions and "restitution" sales (1976–80).
  • Off-market transactions in gold (1999–2000).
  • The IMF’s strictly limited gold sales (2009-2010)
[Mrt: for details see the file, same for all my listings, here is a pick:]

"...In October and November 2009, the Fund sold 212 metric tons of gold in separate off-market transactions to three central banks: 200 metric tons were sold to the Reserve Bank of India during October 19-30; 2 metric tons to the Bank of Mauritius on November 11; and 10 metric tons to the Central Bank of Sri Lanka on November 23.
The IMF announced in February 2010 the beginning of sales of gold on the market. At that time, a total of 191.3 tons of gold remained to be sold. In accordance with the priority of avoiding disruption of the gold market, the on-market sales were to be conducted in a phased manner over time. This followed the approach adopted successfully by the central banks participating in the Central Bank Gold Agreement. The initiation of on-market sales did not preclude further off-market gold sales directly to interested central banks or other official holders. On September 7, 2010, the Fund sold 10 metric tons to the Bangladesh Bank. Such sales reduced the amount of gold to be placed on the market.
In December 2010 the IMF concluded the gold sales program with total sales of 403.3 metric tons of gold (12.97 million ounces), as authorized by the Executive Board. Total proceeds amounted to SDR 9.5 billion (about $15 billion)..."

[Mrt: So is I count right:
In 2009:.... 200t (to India) + 2t (Mauritius) +  10t (to SriLanka) = 212t to CBs "off market"
In 2010:.... 10t (to Sri lanka) from 191,3 = 181,3 sold to other non CBs "on market" based on "priority"
Note: I would love to know the priority list here of inpatient waiting customers & their ability to disrupt maerket.]


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