The International Monetary Fund (IMF) announced that it will, in the near future, begin the on-market phase of its gold sale program. It is the second phase of the total sale of 403.3 metric tons approved by the Executive Board in September last year.

The first phase set aside exclusively for the market sales of official holders. A total of 212 metric tons has been sold during this phase, comprising sales to the Central Bank of India, the Bank of Mauritius and the Central Bank of Sri Lanka.

It was agreed that these profits plus those on the remaining endowment as part of the new income model that no longer relies on lending income to finance the IMF's diverse activities, and will also contribute to boosting the Fund's capacity to provide concessional loans to low-income countries. A key element is that the on-market sales will be carefully phased over time.

In February the total amount remaining to be sold is 191.3 metric tons. Participants in the Central Bank Gold Agreement have noted that the Fund's sales can be accommodated under the agreed ceilings of 400 tons annually and 2,000 ton in total during five years beginning in September 2009. The average sales price so far has been slightly above $1,050 per ounce, which is more than it was assumed when the gold sales were approved by the Executive Board.

The initiation of on-market sales does not preclude further off-market sales directly to interested Central Banks or other official holders. The IMF may sell gold outright on the basis of prevailing market prices and may accept gold in the discharge of a member country's obligations, as loan repayment at an agreed price, based on market prices at the time of acceptance. Such sales would reduce the amount of gold to be sold on the market.

Gold played a central role in the international monetary system until the collapse of the Bretton Woods system of fixed exchange rates in 1973. Since then, the role of Gold has been gradually reduced. But, it is still an important asset in the reserve holdings of a number of countries, and the IMF is one of the largest official holders of gold in the world. In January 2010 the IMF held 96.6 million ounces (which is 3,005.3 metric tons) of gold at designated depositories. The IMF total gold holdings are valued on its balance sheet at Special Drawing Rights (SDR) 4.4 billion (about $6.9 billion) on the basis of historical cost. By February 2010 the IMF's holdings amounted to $105 billion at current prices.

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