Nothing comes of proposal to use gold to relieve poor nations' debt
- By Gilbert Le Gras
Saturday, October 2, 2004
WASHINGTON -- Many Group of Seven rich nations
and gold-mining powerhouse South Africa are
concerned about a proposal to revalue some IMF
gold to fund debt relief for poor nations,
officials said on Saturday.
However, the proposal's author, British Chancellor
of the Exchequer Gordon Brown, said most nations
did not object to the principle of revaluing
International Monetary Fund gold.
"We're in no doubt that this is possible. ... I
don't think in most countries there is an
ideological problem with this," Brown said. "I
didn't ask the G7 to approve my gold proposals
yesterday. What I asked and had agreed is that
further work should be done on them."
But officials from other countries raised concerns on
how this would be implemented and on the implied
reduction of the IMF's working capital -- an amount
Brown said could equal up to the remaining balance
of debts of Highly Indebted Poor Countries (HIPC)
that have yet to be forgiven.
"Are you picking apples off the tree or cutting down
the apple tree to use it as firewood," one official
offered as an analogy for the uncertainty expressed
"Ideologically yes, but from a technical point of view
we have to have a look in depth at the matter,"
Luxembourg Prime Minister Jean-Claude Juncker
Brown's proposal ran into resistance on three grounds:
some national treasuries of IMF shareholder countries
would have to book the entire write-down in the year
of sale; the likely bearish impact on precious metals
markets; and the permanent reduction of IMF assets.
"What about the financial integrity of the fund? ... Do
we want to use IMF assets this way now and then that's it,
we can never use it again?" a G7 source said, adding
that a majority of G7 countries had come to this view.
Brown said various off-market transaction proposals
would be examined to release proceeds from the fund's
vast bullion holding.
The IMF holds 103 million ounces of gold that is valued
at a fraction of its current market price under a 1971
deal, and Brown said they were valued at one eighth of
current market rates, or about $50 per ounce.
Britain wants the reserves revalued to release billions
of dollars for poor country debt relief.
Gold prices rallied to their highest levels in 5-1/2
months by Friday's close, extending their gains over
the past three weeks to 6 percent as traders said they
were waiting for the final outcome of the G7 debt
On COMEX in New York, December gold ended 80 cents
higher at $421.20. It peaked at $421.90 overnight,
bullion's highest price since April 13 when it was
near 16-year highs.
"Revaluation is one thing but there is also the
methodology," South African Finance Minister Trevor
Manuel told Reuters. "What we've asked for is a process
that involves both gold consumers and gold producers."
Between December 1999 and April 2000, the IMF
conducted separate but closely linked gold transactions
with Brazil and Mexico.
The complex process involved the IMF selling a total of
12.9 million ounces of gold to Mexico and Brazil, both
of which had financial obligations coming due to the
The fund immediately bought back the gold at the same
market price, revaluing the metal and settling the two
countries' financial obligations. The net effect of these
transactions was to leave the balance of the IMF's
holdings of physical gold unchanged.
To subscribe to GATA's dispatches, send an e-mail to:
To unsubscribe, send an e-mail to:
RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS
(Korelin Business Report -- audio)
Eagle Ranch discussion site:
Ted Butler silver commentary archive:
COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS
Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112
Centennial Precious Metals
3033 East 1st Ave., Suite 403
Denver, Colorado 80206
Michael Kosares, Proprietor
US (800) 869-5115
European Union 00-800-2760-2760
222 South 5th St.
Montrose, Colorado 81401
Don Stott, Proprietor
El Dorado Discount Gold
Glendale, Arizona 85316
Harvey Gordin, President
Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
178 West Service Road
Champlain, N.Y. 12919
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
Ed Lee, Proprietor
Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
Contacts: David Schectman,
Andy Schectman, and Bob Sichel
Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
Resource Consultants Inc.
6139 South Rural Road
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
Dr. Fred I. Goldstein, Senior Broker
HOW TO HELP GATA
If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.
Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
By credit card (MasterCard, Visa, and
Discover) over the Internet:
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L
Donors of $750 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled "GATA."
GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.