Last Updated : 29 May 2009 at 17:55 IST
IMF gold sale: US Congress approval next week
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LONDON: The International Monetary Fund's decisiion to sell its gold reserves could get the necessary approval from the US Congress next week.
At the G20 summit in London in April, participating countries agreed the IMF could sell 403.3 metric tons of gold as part of efforts to leverage up to $6 billion in concessional loans for low-income countries over the next few years.
In order for the sale to proceed, 85% of IMF shareholders need to approve the proposal. Since the U.S. has 17% of the votes, it has a de facto veto over the proposal, which requires Congressional approval, but IMF Managing Director Dominique Strauss-Kahn told Dow Jones Newswires this week he expects Congress will soon approve the sale.
On Friday, analysts said US Congress may approve International Monetary Fund gold sales as early as next week.
"This issue appears now fully priced into the gold market and any announcement confirming sales should not move the market - apart from perhaps a knee-jerk reaction," said John Reade, an analyst at UBS.
Gold hit a three month high Friday due to U.S. dollar weakness across a number of currencies such as the euro and pound. Traders and analysts said the metal is heading towards $1,000 a troy ounce with speculative buying reentering the market and the dollar weakening.
At 1116 GMT spot gold was trading at $974.90/oz, up 1.7% from Thursday's close.
The approval to sell gold, along with an increase in U.S. funding to the IMF, is scheduled for a debate beginning Monday as part of the 2009 Supplemental.
An initial version of the Supplemental, which includes a wider number of issues such as defense spending, was passed by both the House of Representatives and the Senate earlier this month.
The version passed by the House didn't include the IMF provision but the Senate did approve the limited sale as long as it is done in a way that won't disrupt the market.
Discussions over a final draft between representatives from each house are due to begin next week with a vote possible by next Friday.
"We do not believe the sales, should they occur, will harm gold prices," said HSBC analyst James Steel.
Other member states must also approve the sales plan, which may take many months, HSBC's Steel said, adding the sales are likely to be included in a new Central Bank Gold Agreement, or CBGA. The current CBGA agreement expires in September and analysts expect a new one to be announced soon.
Under the CBGA, 17 European central banks agreed to limit gold sales to 500 tons a year. The pact is adhered to on an informal basis by the U.S., the Bank of International Settlements and the IMF.
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