Is another IMF gold sale fiasco in the works?
Last Friday, June 11, French President Macron proposed during the G-7 meeting that the member countries of this group each contribute gold to the International Monetary Fund (IMF). The stated purpose of this action was to fund greater aid to African nations.
The G-7 is an informal group of seven of the world’s advanced economies: Canada, France, Italy, Japan, United Kingdom, United States, as well as representatives of the European Union.
In my opinion, this call for help to African nations is a deceptive smokescreen. Instead, this proposal has all the signs of being a thinly disguised move to suppress the prices of gold and silver.
Since the start of 2020, the G-7 countries have increased their spending by trillions of dollars as part of the campaign to overcome the COVID-19 pandemic. Does it make sense that these same governments are now unable to raise a few billion more dollars for foreign aid using the same strategies they recently used to spend trillions of dollars? And, therefore, the only way to find those few billion would be to reduce each of their gold reserves?
It would not be the first time that the specter of gold sales by the IMF has been used in an attempt to contain the prices of gold and silver. Let’s review the fiasco of what happened the last time this played out.
Before going into specifics, it makes sense to consider who wants to keep the prices of gold and silver, and why. In my opinion, who is the US government. This is about being the biggest beneficiary of falling precious metal prices.
The US dollar replaced gold as the world’s reserve currency following the Bretton Woods agreement of 1944. When that agreement nearly collapsed, US President Nixon “temporarily” suspended the exchange window of gold from the US Treasury in August 1971, ending the claim that the dollar was as good as gold.
To maintain the fiction that the U.S. dollar, backed for almost 50 years solely by federal government faith and credit, was almost as stable as physical gold, it was necessary for the U.S. government to engage in actions to keep the price of gold (and, by association, silver) as high and for as long as possible.
As long as foreign governments, central banks, and investors could trust the dollar, they would be willing to hold massive amounts of US paper money and Treasury debt. If the prices of gold and silver were to rise, as measured by the dollar, that would be bad news for the US government, the US economy, and the US dollar.
This makes the prices of gold and silver a track record of the government, the economy, and the US dollar. If the US government were to engage in fiscally irresponsible activities such as massive increases in the money supply or huge expansion in spending and budget deficits, the prices of gold and silver would tend to rise. As foreigners worry about the purchasing power of their US dollars, they are urged to repatriate currency and debt from the Treasury to the US government in exchange for goods and services and ownership of real estate and businesses. Americans. Such actions would further cripple the federal government’s finances, adding even more to budget deficits and forcing it to pay higher interest rates on Treasury debt. All of this explains why the US government has the greatest incentive to suppress the prices of gold and silver.
The US government is not acting in a vacuum to suppress the prices of gold and silver. He has the legal authority to manipulate the price of gold using the US Treasury’s Currency Stabilization Fund. However, he must avoid being seen to intervene directly in the gold and silver markets. Therefore, the federal government manages to try to keep precious metal prices low through the actions of allied central banks, international institutions such as the Bank for International Settlements and the International Monetary Fund, and key partners. Federal Reserve Bank of New York trading. .
Here’s how the IMF once tried to keep gold and silver prices low. From January 2007, the IMF began to imply on several occasions that it was considering selling part of its gold reserves. The pretext was then to help the poorest nations. This possible increase in the physical supply of gold had the effect of dropping the price of gold by several percent for two months.
When the negative effect on gold and silver prices of a possible forthcoming IMF gold sale wears off, the IMF will bring the matter up again. The prices of gold and silver would fall again temporarily. When the IMF’s threats to sell gold ceased to drive down gold prices, the IMF actually started selling gold in October 2009. By the end of 2010, it had sold 403 , 3 tons (12.97 million ounces) of gold at five central banks. The central banks of China and India bought most of that total, with minor amounts being bought by the central banks of Bangladesh, Mauritius and Sri Lanka.
Unfortunately for the needs of the US government, none of the gold unloaded by the IMF was ever sold to private investors, making it appear that there were more physical gold stocks available in the world market to maintain. his price. The price of gold is now about 80 percent higher than when the IMF sold its gold.
The IMF’s proposal for another gold sale last Friday put negative downward pressure on gold and silver prices. In recent weeks, gold had hit a five-month price spike and silver was threatening to break through the $ 28 resistance point and continue to rise. At the COMEX close on Wednesday June 16, the price of gold was down less than 2% compared to the COMEX close on Thursday June 10, while silver fell less than 1%. (Note: After COMEX closed on June 16, the Federal Open Market Committee released its latest statement, acknowledging the rise in consumer prices. In response, stock and bond prices fell, bringing with them the gold and silver.)
Compared to early 2007, the dynamics of the physical gold and silver markets have changed. Today, there are significant shortages of physical precious metals to meet demand at current prices, with the price of gold nearly tripling since the start of 2007 and silver having more than doubled. In today’s market, the threat of an upcoming IMF gold sell-off will have less impact, meaning prices won’t fall as far or as long as 14 years ago.
Even if the IMF ends up taking the desperate step of selling more physical gold, the result will simply create a temporary buying opportunity for buyers of gold and silver. As happened at the beginning of this century, the use of the IMF to attempt to suppress the prices of precious metals will ultimately prove to be unsuccessful.
NCBA Dealer Survey Available
As I mentioned in my column in early May, the National Coin & Bullion Association (NCBA, the relatively new trade name now used by the Industry Council for Tangible Assets) on Tuesday, June 15, released its latest national survey of parts dealers. You can read the press release and access a link to the survey at https://bit.ly/3vuOxv5.
This survey is carried out to update the information of the 2016 survey. The results of the survey five years ago have proven to be very effective in the successful efforts to obtain precious metal bullion, coins and coins. sometimes currency sales and use tax exemptions in multiple states. In addition, he was also effective in defending most of the existing exemptions that were being considered for revocation.
This time around, the NCBA is looking for usable answers from at least 400 dealers across the country and from all kinds and sizes of operations. Most dealers could complete the survey in about 10 to 20 minutes. The greater the response from dealers, the better it can be done to secure sales and use tax exemptions in other states and to preserve those that are already in place. I invite you to click on the link above to complete the survey soon.
In the last survey five years ago, I was the volunteer preparing the analysis of the results, serving as treasurer of the NCBA at the time and a member of the board of directors. I am still on the board of directors. By performing the previous analysis, I had access to the data submitted in the surveys, but had no information about the identity or location of any of the survey respondents. Again, those who complete the new survey can rest assured that their identity and financial information will be kept private.
There is one more reason to take this year’s survey. The federal government is issuing new sectoral regulations on cash transactions and money laundering to implement the Money Laundering Act of 2020. The changes came into effect on January 1, 2021. It is possible that s ‘There are enough responses to this new survey, the results could help argue for a lessening of the impact of these regulations. You can also go to https://bit.ly/3gHV7ZV to learn more about the NCBA’s work on this issue.
Patrick A. Heller has been honored as FUN Numismatic Ambassador 2019. He is also the recipient of the 2018 Glenn Smedley Memorial Service Award from the American Numismatic Association, the 2017 Exemplary Service Award, the Harry Forman National Dealer of the Year Award 2012 and the 2008 Presidential Award. Over the years, he has also been honored by the Numismatic Literary Guild (including twice in 2020), the Professional Numismatists Guild, the Industry Council for Tangible Assets and the Michigan State Numismatic Society. He is the communications manager for Liberty Coin Service in Lansing, Michigan, and writes Perspectives of freedom, a monthly newsletter on rare coins and precious metals. Past newsletter issues can be viewed at www.libertycoinservice.com. Some of his radio comments titled “Things you ‘know’ that just aren’t so, and important news you need to know” can be heard at 8:45 a.m. on Wednesday and Friday mornings at 1:20 p.m. WILS in Lansing (which broadcasts live and is part of the audio archive posted at www.1320wils.com).