FACTS ‘N’ FIGURES — IMF to hang on to gold

Although gold no longer has an official role to play in the international monetary system, it continues to serve an important function by underpinning the financial strength of the International Monetary Fund (IMF).

The presence of gold on the IMF’s balance sheet provides reassurance to countries whose currencies are used in fund-lending operations. The IMF currently holds 3,217 tonnes of gold, worth US$31 billion at a price of US$300 per oz. This is about 10% of the gold held in the official sector and around 2.5% of the total stock of gold worldwide.

The fund is no longer permitted to buy gold, and its options are therefore are limited to selling some or all of it, or simply “sitting on it.” There have been suggestions that the IMF should sell its gold, but it has failed, with limited exceptions, to gain the necessary support of the membership.

It is better for the fund to preserve its gold against unknown contingencies rather than sell it to invest the proceeds elsewhere. However, the fund is considering the possibility of selling a small amount of the fund’s gold (up to 5 million oz.) to help with the debt reduction plans of the world’s poorest countries; and another proposal to sell up to 3 million oz. to cover certain late or defaulting loan repayments.

The preceding is an excerpt from Gold and the IMF, a study commissioned by the Geneva-based World Gold Council.