FT on gold sales & Congress's intentions (fwd)

[Robert Weissman <rob@essential.org>]

Tuesday July 6 1999
Financial Times

GOLD: UK tests the waters for sell-offs
By Gillian O'Connor, Mining Correspondent, in London

Tuesday's first gold auction in 20 years will be closely watched by central
banks and the International Monetary Fund. The IMF is expected to vote later
this year to sell a tenth of its gold reserves to help relieve the debt
burden on the world's poorest countries.

The 10 per cent fall in the bullion price since the UK sale was announced in
May has also crystallised the gold industry's opposition to other proposed
official sales, notably by the IMF.

But the "Stop the IMF sale" campaign seems close to turning into a "Get our
gold back from the IMF campaign," which could rebound against the gold
lobbyists.

The UK is just one of a series of central banks which have sold gold
recently, and its proposed sale over several years of 415 tonnes, more than
half its gold reserves, is fairly modest. But its decision to sell by
auction and announce the sale beforehand, has given other prospective
sellers, notably the IMF (300 tonnes) and Switzerland (1,300 tonnes) a test
run at Britain's expense.

"The Bank of England is a role model for many other central banks," Andy
Smith, principal commodities analyst at Mitsui Bussan Commodities, said
yesterday.

If the UK auction goes smoothly, the Swiss and the IMF may use it as a
template. It had been suggested that the three sales could be orchestrated,
with some international body, such as the Bank for International
Settlements, running an joint auction calendar.

This now looks less likely, since the vehemence of the attacks on the UK
government may have made politicians inside and outside the UK wary of
exposing themselves to a further onslaught. After today's sale is out of the
way, attention will switch to Washington, where the lobbying battle has been
gaining momentum and US political opposition is mounting.

The IMF holds about 3,000 tonnes of gold, having sold about 1,500 tonnes
between 1976 and 1980.

At last month's Cologne summit, the leaders of the G7 industrialised
countries approved the sale of up to a tenth of the total, but any actual
sale would have to be approved with an 85 per cent vote by the IMF executive
board.

The vote is likely to take place at the annual IMF meeting in late
September. However, the US has 17 per cent of the votes on the executive
committee, and so could block the sale.

The US administration favours the sale, but Lawrence Summers, the new US
treasury secretary, said last month that the US would not back it unless it
was authorised by Congress.

A concerted lobbying effort against the sale plan has been launched by the
gold industry: producers, mining unions, and politicians from gold producing
countries, particularly in Africa.

Last week Jim Saxton, vice-chairman of the congressional joint economic
committee, introduced legislation in Congress that would prohibit the sales
of IMF gold unless the profits were returned to member states.

Mr Saxton is also reported to have suggested that, if the IMF needs more
money, it should start by giving all its gold back to the member countries.

"There are, for gold, some perilous undercurrents to what is going on. It is
pretty clear that for some of the US politicians the financial autonomy of
the IMF rather than the fate of the gold industry is the gut issue," said
Tony Warwick-Ching, an independent analyst at Virtual Gold Research.