IMF Gold Reserves
IMF maintains gold depository locations in New York, London, Shanghai and Paris that do not function as standalone facilities, but are accounts held by central banks that provide vaulting or storage services for gold deposits.
IMF Gold For Sale | International Monetary Fund The IMF can sell its gold at market rates by majority vote of its Executive Board; however, to do so requires an 85 percent majority vote from within its Executive Board.
How Much Gold Does the IMF Hold?
The IMF holds 90.5 million ounces of gold, one of the world’s largest official holdings of this precious material. These holdings are stored at four designated depository facilities located in New York, London, Paris and Shanghai – these five were chosen in 1946 when initial quotas were allocated by the Fund.
Other than initial quota subscriptions, the IMF’s gold has been acquired through transactions including gold restitutions by Members and sales to Members. Although its gold cannot be sold wholesale without approval of at least 85 percent of its Executive Board members, limited sales can take place to help maintain an subsidized interest rate on program lending to low-income countries (LICs) as well as for other purposes.
To avoid market disruptions, the IMF has conducted its gold sales in off-market transactions in order to generate windfall resources of approximately $10 billion for RST borrowing costs for LICs and possibly meeting projected PRGT subsidy needs.
Why Does the IMF Hold Gold?
Gold holdings of the IMF provide an essential source of strength to its balance sheet. Furthermore, they act as a valuable hedge against creditor claims against its quota resources or loan agreements with member central banks.
Proposals by the IMF for gold sales have often caused significant market reactions. When IMF gold sales were proposed in 1999-2000 to finance their contribution to HEPC debt relief initiative, prices declined sharply and gold producing countries and firms protested strongly; eventually enough resources were generated through complex book transactions within IMF offices.
Stipulations in the IMF’s Articles of Agreement restrict profits from gold sales to operations and transactions consistent with “the purposes of the Fund.” To alter this restriction would require amending its Articles; even seemingly noncontroversial amendments require approval from three-fifths of IMF members representing 85 percent voting power for approval.
How Does the IMF Acquire Gold?
At the Fund’s inception, Members were required to pay part of their subscription in gold; this practice provided it with substantial reserve assets and helped ensure its survival as part of an international system with fixed exchange rates. Five largest quota holders had to designate depositories in New York, London, Shanghai Paris and Bombay where bars of specific fineness and weight would be kept for distribution to each location.
Over a decade ago, modest gold sales were proposed as a means to raise resources for the IMF’s enhanced Heavily Indebted Poor Countries debt relief initiative (HIPC). Gold producing countries and firms protested, fearing damaging effects on global gold prices; alternative ways were found for raising MDRI resources instead. Even now, outright sales require approval by 85.1 percent of Executive Board votes before proceeding and must fulfill strict criteria aimed at avoiding disruption to global gold markets.
How Does the IMF Sell Gold?
IMF gold sales operations are subject to specific legal provisions set forth in its Articles of Agreement, By-Laws and Rules and Regulations as well as additional supporting materials such as Bylaws. According to these legal provisions, profits from gold sales must be placed into its Special Disbursement Account in order to provide concessional balance of payments assistance.
Over a decade ago, when the IMF first proposed selling some of its gold to fund its “new income model”, Executive Directors from developing countries expressed concerns that such sales could depress private market prices of gold while impacting development assistance amounts available for funding.
The IMF’s Managing Director decided to circumvent such concerns by restricting where it sold gold, and mandating that any sale be followed up with off-market sales directly to central banks that were interested in buying it directly from IMF. This strategy effectively avoided disruption to global gold markets while simultaneously yielding windfall profits necessary for its new income model.
Comments are closed here.