INTERNATIONAL. The impact of gold sales by central banks and the IMF will not represent any negative risk on price levels as sales are expected to be orderly and maybe even off market according to analysts.
“We expect that the IMF will sell the gold over the next few years, but do not believe that this presents a strong negative risk to gold prices as it will be orderly and maybe even off market,” Morgan Stanley analyst Hussein Allidina told Bloomberg. “Central banks such as those in China, Russia and Japan are obvious counter-parties” to such off- market sales.

G20 leaders agreed on Thursday that the International Monetary Fund (IMF) should sell gold from its reserve to help stimulate the world economy while the European Central Bank (ECB) earlier this week completed sales of 35.5 tonnes of gold under the terms of a 2004 central bank agreement.

"Additional resources from agreed sales of IMF gold will be used, together with the surplus income, to provide US$6 billion additional concessional and flexible finance for the poorest countries over the next 2-3 years," a G20 statement said.
The IMF’s board approved a proposal in April 2008 to sell 403.3 metric tons of bullion as part of a plan to close the Washington-based lender’s annual deficit.
The IMF is the third-largest holder of gold reserves after the US and Germany, with 3,217 tons in deposits, according to the World Gold Council (WGC).
The ECB gold sales, which were completed this week, conformed to the Central Banks' Gold Agreement of 27 September 2005 that limits gold sales to 500 tonnes per year during the period between 2004 and 2009.
It was signed by 15 European central banks, including the ECB, and followed an agreement reached in 1999 called the Washington Accord, in which European central banks agreed to an annual sales limit of 400 tonnes per year to prevent gold prices from plunging.
At the time, gold was worth around US$260 dollars.
Analysts said they could only speculate on what the money raised might be used for, while noting that the sales were part of a normal procedure.
Among the possibilities were funding for International Monetary Fund assistance to countries in need and compensation for losses the ECB might face in connection with the bankruptcy of US investment bank Lehman Brothers in September or the collapse of the Icelandic banking sector that followed.
Most other prominent central banks are expected to hold to their reserves for now. The next Central Bank Gold Agreement (CBGA) meeting is scheduled for September this year.
A UK official said yesterday the IMF should consider selling gold reserves to raise cash. International Development Secretary Douglas Alexander said there has been discussion with South Africa about the market effects of a “phased and appropriate sale” of some IMF bullion reserves.
WGC data shows the US and Germany have the highest gold reserves with 8133.5 and 3412.6 tonnes.
Gulf central banks hold anything ranging between 2% and 13% of their reserves in gold. But this may change in future according to the WGC
"Central banks with low reserves of gold are looking to increasing their reserves. They are trying to analyse what the right balance should be. They are becoming aggressive," said Aram Shishmanian, CEO of the WGC.
"The current wisdom is that if more than 20% of the reserves of a central bank are in gold, it is overweight. But this perception is changing," Shishmanian said.
Central banks with low reserves of gold are looking forward to increasing their reserves. They are trying to analyse what the right balance should be. They are getting aggressive. And this includes the banks in the Middle East and in the Bric countries," the WGC CEO said.
Gold futures fell Friday, extending weekly losses to 3%, after a less-grim-than-feared March jobs report sustained optimism over a global economic recovery, which has curbed demand for safe assets. Gold for April delivery fell US$11.80, or 1.3%, to end at US$895.60 an ounce on the Comex division of the New York Mercantile Exchange.