Congress to Approve IMF Gold Sale This Week 29 comments
- Brian Kelly's articles on Seeking Alpha
- Visit: Perception is Reality
- Visit: Subscribe to Newsletter
- See me at The Money Show, May 11-14
-
Font Size:
-
Print
- TweetThis
This week the Supplemental Budget Appropriations Bill goes to committee to reconcile the differences between the House and Senate. While most eyes will be focused on the political horse trading that will surely be a part of the process, we will be focused on Title XIII of the bill.
Title XIII, Section 66 is titled, Approval to Sell a Limited Amount of the Fund’s Gold. This section appears on page 105 of a 110 page document and is the authority the IMF has been waiting for since the G20 meeting in April. We noted then as now that these gold sales should have no impact on the gold market for several reasons.
The amount of gold for the proposed sale is 12.97 million ounces (403.3 metric tons). This gold was acquired after the second amendment to the Fund’s Articles of Agreement in April 1978. The Crockett Commission was formed to advise the IMF on the sale of this gold. The recommendation was to sell the gold in a manner that would not disrupt the gold market. It has come to be understood that any sales by the IMF would be subject to the Central Bank Gold Agreement (CBGA), which the IMF is not a signatory.
The CBGA limits gold sales by central banks to 400 tons per year. If the IMF were to sell all the gold in one year it would “crowd out” the other central banks. This is an extraordinarily unlikely scenario.
Hypothetically, if the IMF decided to snub its nose at the CBGA and dump its gold on the market, there still would be virtually no impact. The London Bullion Market is where virtually all central bank and official gold trading takes place. In April, the London Bullion Market transferred an average of 20.5 million ounces of gold everyday. So even if Mr. Strauss-Kahn was feeling a bit irreverent, he could accomplish the sale of 12.97 million ounces in one day.
We see the more likely scenario developing in which China purchases the gold directly from the IMF. Since there is a limit on yearly gold sales it would take a long term forward contract to be executed. We do not think it is purely coincidence that Treasury Secy. Geitner is in China during the same week the Congress is set to give approval to IMF gold sales.
Finally, a sale to China may upset India and several of the Gulf States as they all have expressed interest in purchasing the gold. If this occurs, nothing could be more bullish for the price of gold. Any protest would show just how motivated these governments are to purchase gold. Once the sale is complete, regardless of the buyer or buyers, the gold would then be transferred from weak hands to strong.
Disclosure: I am long GDX and GLD options.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 29 comments:
Never before have so many national treasures been sold at such insanely low prices!
Call now and get missile codes at never before seen prices!
Buy one coal mine, get the second one FREE!
Buy Congress and we'll throw in a Supreme Court justice AT NO ADDITIONAL CHARGE!
Everything has got to go!
And, don't forget, buy $500,000,000,000 in US Treasuries and we'll ship solid gold to you at rediculously suppressed prices!
I have a few places I'd like to test drive one too.
It's a deceptive display of mirages and mirrors meant to support fiat currencies and perhaps settle some underlying discontent. In fact, there's even speculation the gold will end up back in Fort Knox, ready, presumably, to be unveiled at an appropriate time.
The Theory of Rational Expectations is all about managing your expectation, not theirs. Now, just get back to work and pay your taxes on time.
On Jun 02 09:20 AM FxHedger wrote:
> Could someone please tell me why the IMF is so desperate to sell
> its gold when Everyone (majority of SA articles, banks, miners, hedge
> funds, pundits, economists, etc. put future expectations at 1200,
> 1500, 2000, 3500, 9000, depending on who you ask) thinks it has to
> move up from here?
On Jun 02 09:20 AM FxHedger wrote:
> Could someone please tell me why the IMF is so desperate to sell
> its gold when Everyone (majority of SA articles, banks, miners, hedge
> funds, pundits, economists, etc. put future expectations at 1200,
> 1500, 2000, 3500, 9000, depending on who you ask) thinks it has to
> move up from here?
going up.
Too help the poor is what they say.Maybe changing of hands is in the cards.Regardless,China's hands are wide open.
On Jun 02 09:20 AM FxHedger wrote:
> Could someone please tell me why the IMF is so desperate to sell
> its gold when Everyone (majority of SA articles, banks, miners, hedge
> funds, pundits, economists, etc. put future expectations at 1200,
> 1500, 2000, 3500, 9000, depending on who you ask) thinks it has to
> move up from here?
On Jun 02 09:26 AM Vuke wrote:
> Perhaps because they don't want to see it go there?
More often than not the path being taken now by the US reminds me of the path previously taken by the UK during the 1970's
Does anyone remember the 1973 album Selling England by the Pound
If it's physical gold can I get dibs on it before the Chinese, or the Indians, or whomever?
Do you think G20 decided to sell IMF gold? instead of giving poor countries couple of Billion US dollars printed with fresh ink. This money is lot less than allocated to GM.
My guess is, they are all scared... as they all decided to print bills that their only real enemy is gold and commodities which are real and will show the true face of inflation they are creating.... Just look at USD vs. Euro parity is now 1.43,
But when Europe starts printing also what will happen? Euro will go down or USD will go up. In the end they will end up as
both printed a lot of paper money with no change in parity...
Their Only enemy is gold as they can't print gold and it will show the real devaluation of all their currencies...
So 20 countries which normally cannot agree on anything, agreed on selling gold...But now with a lot of Central Bank buyers... is not a good sign that they looked for...Their aim was to scare people to dump their gold (physical or digital) and lower the price of gold....
I am not helping them I am helping myself and buying as much as I can since it was 750 USD an ounce and tonight possibly will brake 1000 USD...
On Jun 02 11:45 AM GoldMoney wrote:
> The IMF gold came from latin America as part of a bailout package
> in the 90s. The IMF is selling it now so that the banksters can buy
> it and stash it away ahead of the crack-up boom that is brewing.
> They want the gold out of any public domain where citizens may lay
> claim to it. Might be a good opportunity to back up the truck if
> they drive the price down.
The US govt is bailing them out apparently by freeing up the IMF gold. Interesting story and interesting spin, no doubt the elites are shaking in their boots as China fills it coffers with real money. Read Jim Willie's website if you are curious.
What people often fail to consider is gold from the viewpoint of the CB. Gold is their "chips" in the game and can be passed back and forth at whatever value they deem for the day. That "official" valuation of $42 an ounce is their vision of what the world should perceive. A sort of subliminal anchor we all drag around as we pay $1,000 for a $42 product.
BUT, in their world, the perception is far different. "I'll trade you 100 tonnes of gold for this much paper or that much oil" is the difference betweem them and us. That, and the fact they can let the price gradually rise until it is adequate to back paper, if necessary, as a last resort.
Notice too, often ABX is mentioned. And their payback? Huge gold debts they have time forever to discharge at leisure. Sufficient hard cash, at the time, to almost corner the world gold market.
Great reading, and a tip of the hat for digging it up. For the doubter who reads through it, the account should dispel forever the idea gold "has no useful function".
On Jun 02 10:35 AM Market Sniper wrote:
> Here is some thoughts by "Another"...this is an old thread. "Another"
> supposedly is a very highly placed individual somewhere in the Middle
> East. He makes the case that the deal is cheap gold for cheap oil.
> I find this absolutely fascinating and helps to explain a lot. Seems
> Gordie Brown may have taken the hit for the home team when he dumped
> Britain's gold. Well worth a perusal. Do not know the veracity. www.usagold.com/goldtr...
>
Just follow the action on gold these past two days. The massive shorts have been trying to hammer down the price, with not much luck. In the past they would trundle out the old "SELLING IMF GOLD", story to scare the market price down. Well. Guess what? Not any more. Kinda blew up in their faces. A little "strong arming" by China to purchase the whole lot at one go, with a reserve bid put in almost immediately as the announcement was made! Yes. I would say someone is in trouble. Old Mother Hubbard went to the cupboard...
> There's a strong rumour out there that a large financial institution
> who works with the US govt to keep gold in check is heavily short
> gold at the COMEX and in big trouble because they won't be able to
> deliver on their contracts for June. Some contractors have called
> for delivery and the whole system is wobbling.
>
> The US govt is bailing them out apparently by freeing up the IMF
> gold. Interesting story and interesting spin, no doubt the elites
> are shaking in their boots as China fills it coffers with real money.
> Read Jim Willie's website if you are curious.
Hypothetically, if the IMF decided to snub its nose at the CBGA and dump its gold on the market, there still would be virtually no impact.
Much ado about nothing.... 12 million is half a days normal trading does not matter who sells or buys tommorow the rolls can reverse
On Jun 02 08:37 AM Market Sniper wrote:
> One quick question. Could this gold be some of the gold "lent" to
> the IMF by the US Fed that was "lent" to them by he American People
> way back when? Otherwise, WHY would this IMF sale need US Congressional
> approval? Here is ANOTHER interesing little bit of information tucked
> away in an obscure governmnt report. Take a look. this also needs
> to be checked out! www.financialsense.com...
I'm wondering if there will be a sort of a backfire effect, in reminding the masses that gold is out there, and governments, banks, folks who "matter" pretty much treat it just like munny regardless of what their pet economists spew. Kind of hope so. If not, I'll pick some up on the retracement and wait until the next act of desperation.