The International Monetary Fund on Thursday said it will shortly begin selling gold in the open market under its gold sales programme, which was launched last year to raise more money for lending.
In September last year, the IMF had decided to sell 403.3 metric tonnes of gold to raise money to fund poverty alleviation projects in the third world countries.
The total amount remaining to be sold in this phase is 191.3 metric tonnes.
Until now the Fund has sold 212 metric tonnes of gold but it was limited to central banks. The Indian central bank had purchased 200 tonnes of gold last year while Sri Lanka and Mauritius were the other purchasers.
The IMF said the 'on-market' sales will be conducted in a phased manner over time to prevent any disruptions to the gold market.
However, the IMF said the initiation of the on-market sales does not preclude further off-market gold sales directly to interested central banks or other official holders.
Meanwhile in an interview to IMF Survey Magazine, the IMF finance director, Andrew Tweedie, said IMF is still open to off-market sales.
"All that has happened now is that we are moving to also start on-market sales. But if central banks or other official institutions are still interested in purchasing gold directly from the IMF, and if we still have gold available, we would stand ready to conduct off-market sales," he said.
The average price for the three sales -- India, Sri Lanka and Mauritius -- Tweedie said was a little over $1,050 per ounce. The sales have generated total proceeds equivalent to $7.2 billion and profits of about $4.5 billion over the book value of this gold in the IMF's accounts, he said.
"The profits will be used to create an income-generating 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," he said.
The Reserve Bank of India purchased 200 tonnes of gold, while Sri Lanka bought 10 tonnes and Mauritius bought two tonnes from the IMF last year.
"Because of the relatively large amount involved, it was done over a period of two weeks through a series of forward transactions. Settlement took place at the end of the period. The reason for proceeding that way was to protect both the Reserve Bank of India and the IMF from large unexpected price fluctuations that could occur on any individual day," he said.
As a result, gold was effectively sold at the average market price over a two-week period rather than the price prevailing on one particular day, which could for some reason be out of line with normal market conditions, he said.
"However, we still need to see what happens to the gold price during the second half of the sale before we can conclude that we have additional revenues. I expect the IMF's Executive Board to come back to this issue in due course," he said.
