IMF Selling Gold

Gold has experienced some near-term weakness as the IMF prepares to sell up to 403 metric tons of gold to fund part of its $50 billion aid program. With 3,217 tons of reserves, the IMF is the world's third-largest official holder of gold behind Germany and the U.S. As such, there actions clearly will have ripple effects throughout the market. Despite the near-term technical issues, the long-term trends for gold remain firmly intact and I would imagine that we will see much higher prices several years from now. Further, countries that remain vastly underinvested in gold stand ready to absorb much of this inventory that hits this market. As noted in prior posts, China is considering increasing its gold reserves from 600 to as much as 4,000 metric tons, which could have signficant long-term implications for the price of gold (not to mention the massive amounts of paper currency being printed by the developed world).