Posted on 06/21/2009 5:23:52 AM PDT by FromLori
FUNCHAL, MADEIRA - In a statement issued on Friday, the World Gold Council (WGC) says it welcomes the news that the U.S. House of Representatives has, in effect, finalised the process whereby the IMF can sell 403.3 tonnes of gold "in a manner that will have no impact on the smooth running of the international gold market." The approval was tied to the Military Supplemental Bill which covered additional funding for the Iraq and Afghanistan conflicts for the U.S forces and also approved $108.6 billion in funds to support the IMF in a role to prevent global economic meltdown and the problems which might occur as a result - see: Obama Administration pushes IMF gold sales through House
As it happens there is still another hurdle for the bill to pass and this is through the U.S. Senate, but the tieing of the bill to state security should ensure its passage through the upper house too whatever the Senators' views on the specific IMF gold sale aspect.
While the bill itself does not specifically tie the IMF sales to an orderly sales programme, the IMF has stated publicly that any such sales should be made in co-ordination with current and future Central Bank Gold Sales Agreements whereby signatories have to agree to limit total annual sales to less than a specific volume (currently 500 tonnes). (For a review of the Central Banks which signed the existing agreement and its basic terms go to Central Bank Gold Agreements (CBGA).) However the current CBGA agreement runs out in September this year and although it is due for review, and would, on past agreements, already have been reviewed if there is to be another such agreement there does not yet appear to have been any such review to date.
Indeed as we pointed out in our previous article - it may even be felt that a renewal of the CBGA may not be felt to be necessary as the appetite for Central Bank gold sales appears to have diminished with gold seemingly increasingly regaining lost ground in its role as a key monetary instrument and uncertainty on the future of the US dollar. If there is no renewal then it will, presumably, be up to the IMF to release its gold in an orderly manner in any case.
In the scheme of things the sale of 403.3 tonnes of gold is not a huge amount unless it all came on the market at once, and this does seem unlikely. And the market already seems to have discounted the future IMF sale in any case, so there should not be a negative impact on the gold price. Indeed the lack of reaction to Congressional approval of the sale may well be considered positive for gold.
As Aram Shishmanian, the WGC's chief executive pointed out in a statement: "We are pleased to see that the IMF's plan to sell gold in a structured and non-disruptive manner has gone through due political process without problem, which is a credit to the responsible behaviour of all parties involved in the process. These sales will not constitute any net addition to the amount of gold the market is already expecting from official sector sources as a whole, and therefore we anticipate zero market impact. We believe this announcement, if anything, will lead to positive sentiment among market participants as it clarifies that there will be no net addition to overall gold supply."
He goes on to say "In these times of financial instability, gold's universal role as protector of wealth has come to the fore, not least as a crucial part of reserve asset portfolios. The fact that these sales will effectively rescue the IMF from a difficult situation regarding its own finances is proof of gold's unique investment characteristics, long-recognised by central bankers and institutional and retail investors alike." Given the IMF's status as "a lender of last resort", the WGC believes it is imperative that the organisation continues to hold large gold reserves and acknowledges the IMF's public declarations that: "The IMF should continue to hold a relatively large amount of gold among its assets, not only for prudential reasons, but also to meet unforeseen contingencies."
Well, what can you expect from the American universities’ brightest scholars.
Cash4Gold
We are rapidly losing any ability to again have a gold-backed currency. Ragnorok awaits!
The news is that the Democrats snuck into the military-spending bill a $100 billion dollar giveaway to the IMF -— using US taxpayers’ money — when we are headed for what will prove to be THE worst economic crisis since the Great Depression.
My bet is on the ChiComs.
BULL. The purpose of this sale is to depress the price of gold.
You win the prize very perceptive!
“Great another app. 1/10th of our GDP...”
How do you figure? Our GDP far exceeds one trillion dollars, no?
And thus create a buying opportunity. Maybe...
Great,I’ll purchase more.This nonsense always backfires on the funny money paper pushers.
I admit my math is horrible, but am I that far off?
Isn’t 100 Billion 1/10 of 1 trillion?
A trillion is a thousand billion. 100 x 10 = 1000, no?
Right - and the US has a GDP of about a trillion a month. So it is 1/10th of 1/12th of our GDP. Way too much but not exactly or even close to one percent.
Our GDP = one trillion per month?
Where did you get that estimate?
By the way, I wrote that post BC (before coffee).
What I meant was 1/8 of the printed currency we have in circulation.
I was around when the dollar was "freed" from the last of the gold backing. Just before that we had a "two-tier" market where the govt (first tier) said that gold, in 1971, was STILL worth only $35 while the free market (second tier) imediately went to $40 and kept climbing.
Lots of discussion about the value of gold, with the liberals and govt hacks naturally pooh-poohing it. The best one was Paul Samuelson, who stated that the only reason gold had any value was because it could be swapped for dollars. I kid you not. This guy is still making TV appearances as an economic guru.
A pretty decent refresher on the gold standard is at Wiki. Click on the picture of our good paper money, where it said "This certifies that there has been deposited in the Treasury of the United States [dollar amount] in gold coin [my emphasis] PAYABLE TO THE BEARER ON DEMAND". In other words, our paper currency was nothing more than a warehouse receipt that was easier to carry around than the coin. Now we have depreciating IOUs and are told it is "just as good".
bump that!
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