IMF seeks to sell 403.3 tonnes of gold to boost finances

[seafan]

IMF seeks to sell 403.3 tonnes of gold to boost finances

08 April 2008 0506 hrs
Channel News Asia---AFP

WASHINGTON : The International Monetary Fund on Monday proposed the sale of 403.3 tonnes of its gold reserves as part of a wide-ranging financial overhaul.

The sale could yield around 11 billion dollars, IMF officials said.

Managing director Dominique Strauss-Kahn said in a statement the IMF would use the funds to help shore up the finances of the international organisation and create a new endowment with more diverse investments.
The move is contingent on a charter amendment that would need legislative action in most member countries.
The sale would include about 12 percent of the IMF's gold reserves, or 13 million ounces of the 103.4 million ounces of reserves.

The reform plan, which requires approval by 85 percent of the institution's 185 member nations, has been under debate for months in the financial institution, whose revenues are shrinking amid a decline in lending.

.....

The announcement came ahead of the spring meetings of the IMF and its sister institution, the World Bank, in Washington this weekend.

.....

To proceed with the gold sale, the United States, the biggest stakeholder, needs approval from the US Congress. The creation of an endowment fund for investments, from part of the profits of the gold sale, requires an amendment to the charter.
If approved, the new income model "could generate" an additional 300 million dollars in income within a few years, the IMF said.

Econ gurus, what are the implications of this?

[DCKit]

1. Looting at the IMF. They must be desperate. n/t

[modernfan]

2. They're desperate alright...

Desperate to suppress the price of gold.

[gravity]

3. I think the IMF wants to diversify its assets

and is selling some of its gold reserves to do this. Since the price of gold is high, it could be a smart thing to do.

I really don't know the exact financial implications of it, but it doesn't seem like anything sinister or risky.

[AdHocSolver]

4. They sell gold to increase its supply and force the price down. At the same time, ...

they take dollars out of circulation to reduce their supply in an attempt to bolster the value of the dollar, so as to cap inflation.

It is a last ditch effort to prevent a total meltdown of the world's economies and a great depression.

[On the Road]

5. It Means That If They Go Through With This,

it will not be a good time to invest in gold.

The IMF might not be alone in this situation. If economic difficulties continue, more gold from many sources may be dumped in order to raise cash.

[DemocratInSoCal]

6. What I'm Wondering Is....

Sure, they may be dumping, but if someone is out there to buy it, the price is not going anywhere.

And you know what? They're dumping because they're desperate. So desperate, that they're not going to worry if they end up looking stupid, when Gold is well over $1,000 later this year. They need their short term fix, and won't concern themselves with holding onto an asset that may be worth more down the road.

Ya know, instant gratification, instead of patience and wise investment practices.