Questions and Answers

IMF Gold Sales

Last Updated: May 12, 2009

Strictly limited gold sales (403.3 metric tons) are being discussed by the membership of the IMF as part of a package of expenditure and income measures to put the IMF's finances on a sustainable basis. No Executive Board decision to sell gold has been taken.

Q. How much gold does the IMF hold and how was it acquired?

• The IMF holds 103.4 million ounces (3,217 metric tons) of gold, making it the third largest official holder of gold. The gold is valued on its balance sheet at SDR 5.9 billion (about $9.2 billion) on the basis of historical cost. The market value of this gold was $95.2 billion as of February 20, 2008.

• Most of the IMF's gold was acquired prior to the Second Amendment of the IMF's Articles of Agreements in April 1978. The main source was members' initial quota subscriptions and subsequent quota increases, of which 25 percent were to be paid in gold. Other sources were payments of charges (i.e., interest on members' use of IMF credit), repayments to the IMF for credit previously extended, and sales of gold to the IMF by members wishing to purchase the currency of another member.

• The IMF also acquired a portion of its gold holdings after the Second Amendment, amounting to 12.97 million ounces (403.3 metric tons), with a market value of $11.9 billion as of February 20, 2008. This gold was primarily acquired through the off-market gold transactions in 1999-2000, where the IMF received 402.6 metric tons of gold as repayments of IMF credit. The remaining 0.7 metric tons was received as a repayment from Cambodia in 1992.

Q. What IMF gold can be restituted (returned) to its members?

• The Articles provide for restitution of the gold the IMF held on the date of the Second Amendment to current members that were members of the IMF on August 31, 1975. The restitution of gold to this group of members would be implemented by selling gold, at the former official price of SDR 35 per ounce (about US$56), to those members who agree to buy it in proportion to their quotas on the date of the Second Amendment. (An Executive Board decision to restitute gold requires support from an 85 percent majority of the total voting power.)

• The Articles do not provide for the restitution of gold the IMF has acquired after the date of the Second Amendment. Hence, the 403.3 metric tons of gold the IMF has acquired since the Second Amendment is not available to be restituted to members.

Q. Why does the IMF hold gold and what is IMF policy on gold sales?

In addition to the limitations set forth in the IMF's Articles of Agreement, the IMF's policies on gold are guided by the following five principles:

• The IMF has a systemic responsibility to avoid causing disruptions that would adversely impact gold holders and gold producers, as well as the functioning of the gold market.

• As the only asset with significant unrealized value, gold provides fundamental strength to the IMF's balance sheet. Any mobilization of IMF gold should avoid weakening its overall financial position.

• Gold holdings provide the IMF with operational maneuverability both as regards the use of its resources and by adding credibility to its precautionary balances. In these respects, the benefits of the IMF's gold are passed on to the membership at large, including both creditors and borrowing members.

• 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.

• Profits from any gold sales should be retained, and only investment income should be used for purposes that may be agreed upon by IMF members and are permitted by the Articles of Agreement.

Q. Why is the IMF considering gold sales?

• The report of the Committee of Eminent Persons chaired by Andrew Crockett (the Crockett Committee) recommended that the IMF adopt a new income model with more diverse sources of income, so that it no longer relies primarily on lending income to finance its various activities, which include public goods such as Article IV surveillance.

• One of the income sources the Committee proposed is the creation of an endowment funded from the proceeds of strictly limited gold sales to be carried out within safeguards to avoid disruption of the gold market (see this question).

Q. How has the April 2, 2009 G-20 Summit affected the IMF's planned gold sales?

• At the G-20 Leaders Summit on April 2, 2009, world leaders proposed to use additional resources from agreed sales of IMF gold to provide $6 billion in additional financing for poor countries, in a manner consistent with the IMF's new income model, over the next 2 to 3 years.

• There has been no change in the amount of the planned gold sale, which remains strictly limited to the 12.97 million ounces (403.3 metric tons) of gold the IMF has acquired after the Second Amendment, which is equivalent to one-eighth of the IMF's total gold holdings.

Q. Has the IMF decided to sell gold?

• No Executive Board decision to sell gold has been taken. Under the Articles of Agreement, a decision to sell gold requires an 85 percent majority of the total voting power.

• The United States authorities have informed the IMF that U.S. Congressional authorization by law would be required before the U.S. Executive Director could support a decision for the IMF to sell gold.

• The United States Treasury announced on February 25, 2008 that it will seek authority from Congress for a limited sale of gold, consistent with the Crockett Committee's recommendation. On April 16, 2009, President Obama urged leaders of Congress to support an IMF gold sale as part of a larger package of measures requiring congressional action.

Q. What is the expected volume of gold sales?

• The Crockett Committee recommended that gold sales be strictly limited to the gold the IMF has acquired after the Second Amendment, which amounts to 12.97 million ounces (403.3 metric tons), equivalent to one-eighth of the IMF's total gold holdings.

• As noted above, there is no provision in the Articles to restitute this portion of the IMF's gold holdings to members of the IMF.

Q. At what price does the IMF expect to sell gold?

• The Fund will sell gold at the market price when the sales are conducted, and the sales could be phased over time to avoid market disruption as noted above. When the new income model was endorsed by the Board of Governors in May 2008, the price assumed for the purpose of making medium-term income projections was $850 per ounce, which was based on current and historical developments in gold prices at that time. However, in practice, the price realized for the proposed sales may be above or below this assumption depending on market developments.

Q. When are the sales going to take place?

• No Executive Board decision to sell gold has been taken, so no timetable for sales has yet been set (see this question).

• If gold is sold on the market, rather than to another official gold holder, the Crockett Committee recommended that such sales be phased over time in order to avoid disruption of the gold market.

Q. How will disruption of the gold market be avoided?

The Crockett Committee recommended a number of safeguards on gold sales to avoid disruption of the gold market:

• The Committee recommended a firm limit on the volume of gold sales as a key safeguard, given the IMF's standing as the third largest official holder of gold.

• The Committee recommended that the IMF's gold sales should not add to the announced volume of sales from official sources. Hence, the IMF's gold sales should be coordinated with current and future Central Bank Gold Agreements (CBGA). (Under the current CBGA, a group of European central banks have agreed to limit their gold sales to no more than 500 metric tons annually).

• Phasing of IMF gold sales over time is also recommended by the Crockett Committee to avoid disruption of the gold market, together with careful handling of the public communications related to gold sales.

Q. Where can more information about the IMF gold be obtained?

• More information on the IMF gold is available at the fact sheet GOLD IN THE IMF.

• Gold in the IMF
• Special Drawing Rights (SDRs)
• Report by the Committee to Study Sustainable Long-term Financing of the IMF
• Central Bank Gold Agreements (CBGA)