As noted on this blog before, the IMF wants to sell gold to fund more international welfare programs but must have the approval of the US Congress before it can sell any gold. In a February 2008 post, I speculated that approval under a new Congress would be likely. Now, approval appears imminent.
This week a House-Senate committee will meet to reconcile differences between the House and the Senate in the Supplemental Budget Appropriations Bill. Buried in the bill is approval for the IMF to sell gold. No one is objecting to the sale.
To some, talk of a major institution selling gold is frightening. But, as I noted in the February 2008 post, the gold market has seen IMF sales before and has weathered them nicely.
As the mainstream media report the approval, there may be some downside movement in gold, but at least one gold analyst and investor sees the IMF sale as positive for gold.
Brian Kelly, writing for seekingalpha.com, sees China stepping forward and buying the gold. Kelly doesn’t think that it’s a coincidence that Treasury Secretary Timothy Geithner just ended a trip to China.
By all reports, Geithner avoided all contentious issues with China, such as massive Chinese theft of intellectual property or revaluing the Chinese currency. Instead, he sought a “greater role for China in the International Monetary Fund.”
Kelly further speculates that a sale to China would 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.”
Frankly, I haven’t seen anything substantive about India or any Gulf States wanting to buy the IMF gold. But, I guess it could be true. If I were sitting the gargantuan quantities of dollars that those nations hold, I’d want to buy gold. I just wonder if Kelly really has such information or is he, as a gold investor, simply wishing a major buyer would step forward.
Regardless, when news comes out that Congress has approved the sale of IMF gold, it will roil the markets. Bargain hunters may have opportunities to buy on dips in price. And, if Kelly is right about India and some Gulf States wanting to buy the IMF gold, he will certainly be right about that being bullish for gold.