Friday, December 9th, 2016 MST

Analysis of proposed IMF gold sales

Resourceinvestor.com has posted an excellent report on the proposed gold sales by the IMF.

Before anyone panics at the idea of the IMF selling gold, I would like to point out that in the 1970s both the IMF and the US Treasury sold gold while it marched to $850. Further, European central banks have been selling gold for years, and gold prices are at record highs.

Additionally, the recommendation for the sales calls for limited sales, maybe up to 400 tons and “sold in a way that didn’t disrupt the market, much like gold sold consistent with the European Central Bank Gold Agreement (EGA), which limits sales to 500 tonnes per year.”

ResourceInvestor notes that past proposals have been blocked by the US Congress, which has, because of weighted voting power, a virtual veto on any IMF gold sales. However, come January 2009, I suspect Congress will have a much more liberal makeup than it now has, and it may not block IMF gold sales, especially with promises of limited sales that are done in a nondisruptive manner.

We may have to put up with IMF gold sales in future years, but the possibility does not dampen my enthusiasm for gold (and sliver). None of the likely presidential winners has any plans to address the massive bleeding of dollars by the US Treasury.

McCain is a war candidate and has said he will continue the occupation of Iraq. McCain has never addressed the financial cost of doing so. Clinton and Obama, while saying they will end the war in Iraq, offer such potpourris of social programs that the dollar will strain under them.

With the likelihood of one of these three becoming president and major shift to the left in Congress (already 21 Republican members of the House have said they will not run for reelection.), I cannot find anything positive for the dollar on the political scene. Although IMF gold sales may turn into reality sometime in the future, I don’t worry about them at all. Investing in gold and silver makes a lot of sense for these times.