Influx of Gold Is on Horizon

April 16, 1999

Influx of Gold Is on Horizon

As the International Monetary Fund and the government of Switzerland make plans to sell large portions of their gold stores, market watchers are concerned about a sharp drop in gold prices.

The IMF hopes to win authorization during a meeting of world finance ministers this week to sell 5 million to 10 million ounces of its $29.25 billion in gold to finance debt relief for impoverished countries, according to The Wall Street Journal. President Clinton announced his support for gold sales when calling on the World Bank and the IMF last month to provide an additional $70 billion in debt relief to struggling countries such as Brazil. Gold traders have been expecting the IMF metal to hit the market for some time, says WSJ. However, IMF officials still worry that falling prices may disrupt markets and cut mining revenue for developing countries.

In the meantime, Swiss voters approved a new constituion that eliminates gold backing of the Swiss franc, providing for the government's plan to sell 1,170 metric tons of excess gold, about half of the country's stores. Sales won't start until later next year, after Parliament passes legislation regulating them. Government officials have said the stockpiles will be sold off a little at a time over a long period so as not to depress the market.

- by Stacey King