September 20, 1999. Copyright 1999. Graphic News. All rights reserved.

UK GOLD SALE WRONG-FOOTED BY IMF

LONDON, September 20, Graphic News: BRITAINÕS CHANCELLOR of the Exchequer, Gordon Brown, will be obliged to back a compromise deal at the International Monetary Fund as a result of the U.S. Senate spurning his plan to sell IMF gold to relieve Third World debt.
The report came as the gold market waited nervously for the latest UK Treasury gold auction. This second planned bi-monthly sale of 25 tonnes is part of a programme to sell most of the UKÕs gold reserves.
In early July gold fell more than $5 an ounce to a 20-year low of $256.80 after the Bank of England sold its first tranche of 25 tonnes at auction.
BritainÕs gold sales are intended to boost foreign exchange holdings at goldÕs expense. Economists argue that central banks carry too much gold from the time of the gold standard, suggesting a switch towards dollars, euros and yen for a better balance in reserves.
Finance ministers will now study ideas at next SundayÕs meeting of the IMFÕs interim committee Ð which Brown now chairs Ð in an effort to win the support of the U.S. Congress.
The original IMF plan to sell some 300 tonnes of gold Ð a tenth of its reserves Ð to pay for debt relief and low-interest loans for poor countries was put forward by the Group of Seven nations after a meeting earlier this year in Cologne. The interest generated by investing funds from the gold sales would relieve debts of 41 of the worldÕs poorest nations.
But the IMF plan hit a wall of opposition in the U.S. Congress who would have to approve any such bullion sale. Critics, including the gold-producing U.S. western states and others, argued that the plan would pressure the price of gold lower and therefore hurt countries reliant on gold exports for economic development.
The new proposals now portray Britain as the enemy of 36 gold producing countries originally selected for relief.
Described as Òsmoke and mirrorÓ accounting, the IMF has book valued its gold stocks at about $45 an ounce for decades compared with a market value of $255 and the 1980 price hike to $850. 
Countries that are due to repay debt to the IMF will buy the gold at the market price and give it back immediately as a means of repaying the debt. This would avoid any necessity to flood the depressed market for the metal.
Critics say this would mean the only countries willing to buy the gold would be poor countries strong-armed into doing so.
/ENDS