Is there a case for IMF gold sales?

With developing countries facing intense financial pressure and developed countries slashing foreign aid, it can be tempting to dream of stumbling across a pot of gold. Dream no longer: The International Monetary Fund is currently sitting on 90.5 million ounces of the metal.

- TIM HIRSCHEL-BURNS MARINA ZUCKER-MARQUES

A relic of the gold standard, these holdings could be quickly turned into tangible funds. After hovering around US$2,000 (65,200 baht) per ounce for most of the last half-decade, the price of gold has now topped $4,000 per ounce. Even in real terms, this is a record high. But you wouldn't know it from looking at the IMF's balance sheet, which values its gold at just $50 per ounce, a price last seen in the 1970s.

In reality, the IMF's gold reserves are worth over $350 billion — more than Chile's GDP. Selling just 10% of these holdings would generate enough funds to offset this year's foreign-aid cuts.

Such a move is not without precedent. The IMF has sold gold several times, most recently in 2009-10. The Fund used the proceeds from that sale to create an endowment account that complements IMF revenue and subsidises the Poverty Reduction and Growth Trust, its concessional lending arm for low-income countries.

The case for selling a small share of the IMF's gold is even stronger today. The funds could help support cash-strapped developing countries, without requiring any donor contributions. And by placing them in an endowment account, the IMF could create a long-term, sustainable source of concessional financing for these countries. Perhaps most importantly, the Fund might never get a greater bang for the bullion.