The IMF Executive Board has approved the sale of one-eighth of the agency's gold reserves, up to 403.3 metric tons, with the sales to be conducted under safeguards against disruption of the gold market.

The gold sales are a critical element of a package of measures approved in April 2008 aimed at setting the IMF's finances on a sound long-term financial footing. An endowment will be created with the profits from the gold sales.

The gold sales profits are also aimed at increasing the fund's resources for lending to low-income countries, a policy approved in July of this year. The IMF hopes to increase its concessional lending by up to $17 billion through 2014, including up to $8 billion over the next two years. The agency also approved zero interest payments on outstanding concessional loans through the end of 2011 for all low-income members.

Because of the global economic crisis, the IMF has more than doubled its financial assistance to low-income nations. "Since the crisis hit, we have been listening and responding to our members countries," said IMF Managing Director Dominique Strauss-Kahn. "The scaling up of the IMF's support not only will help these low-income countries weather a crisis that is not of their making, once the crisis has passed, it also will pave the way for progress in the battle against poverty."

The IMF holds 103.4 million ounces (3,217 metric tons) of gold valued at about $9.2 billion on the basis of historical cost. As of August 28^th, the IMF's holdings amounted to $98.8 billion at current market prices.

When the IMF was founded in 1944, it was decided that 25% of the initial quota subscriptions and subsequent quota increases were to be paid in gold. This represents the largest source of the agency's gold.

All payments of charges (interest on member countries' use of IMF credit) are normally made in gold.

In the past, the IMF has sold gold on several occasions to replenish its currencies holding. The fund also sold gold to offset operational deficits, and to reduce its past gold holdings.

In August, the European Central Bank and other central banks renewed the Central Bank Gold Agreement, which limits gold sales to not exceed 400 metric tons annually and 2,000 metric tons over the next five years, beginning on September 27, 2009. The central banks' announcement noted that sales of 403 metric tons of gold by the IMF can be accommodated with these ceilings.

Strauss-Kahn said, "These sales will be conducted in a responsible and transparent manner that avoids disruption of the gold market. Most importantly, the sales are strictly limited to 403.3 metric tons, which is one-eighth of the fund's total holdings, so the IMF will continue to hold a relatively large amount of its assets in gold." Since the IMF is the third largest holder of gold after the United States and Germany, unexpected large sales of gold could disrupt the gold market.

Prior to selling the gold on the market, the IMF is prepared to sell the gold directly to central banks or other official sector holders. These sales to official sector holders will be conducted at market prices and would shift official gold holdings without changing total official gold holdings.

Any gold sales on the market would be phased over time, the IMF said. Regular external reporting on gold sales will also be provided to assure markets that gold sales are being conducted in a responsible manner.

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