Welcome to the twilight zone of IMF gold sales, where transparency
really means secrecy, where on-market is off-market, and where IMF gold sales
documents remain indefinitely “classified” and out of public view due to
the “sensitivity of the subject matter”.
Off and On Market
Between October 2009 and December 2010, the International Monetary Fund
(IMF) claims to have sold a total of 403.3 tonnes of gold at market prices
using a combination of ‘off-market’ sales and ‘on-market’
sales. ‘Off-market’ gold sales are gold sales to either central banks or
other official sector gold holders that are executed directly between the
parties, facilitated by an intermediary. For now, we will park the
definition of ‘on-market’ gold sales, since as you will see below, IMF
‘on-market’ gold sales in reality are nothing like the wording used to
describe them. In total, this 403.3 tonnes of gold was purportedly sold
so as to boost IMF financing arrangements as well as to facilitate IMF
concessional lending to the world’s poorest countries. As per
its Articles of Agreement, IMF gold sales have to be executed at market
prices.
Critically, the IMF claimed on numerous occasions before, during and after
this 15-month sales period that its gold sales process would be ‘Transparent’.
In fact, the concept of transparency was wheeled out by the IMF so often in
reference to these gold sales, that it became something of a mantra. As we
will see below, there was and is nothing transparent about the IMF’s gold
sales process, but most importantly, the IMF blocked and continues to block
access to crucial IMF board documents and papers that would provide
some level of transparency about these gold sales.
Strauss-Kahn – Yes, that guy
On 18 September 2009, the IMF announced
that its Executive Board had approved the sale of 403.3 metric tonnes of
gold. Prior to these sales, the IMF officially claimed to hold 3217.3 tonnes
of gold. Commenting on the gold sales announcement, notable party attendee
and then IMF Managing Director Dominique Strauss-Kahn stated:
“These sales will be conducted in a responsible and transparent manner
that avoids disruption of the gold market.”
The same IMF announcement on 18 September 2009 also stated that:
“As one of the elements of transparency, the Fund will inform markets
before any on-market sales commence. In addition, the Fund will report
regularly to the public on the progress with the gold sales.”
On 2 November 2009, the IMF announced
the first transaction in its gold sales process, claiming that it had sold
200 tonnes of gold to the Reserve Bank of India (RBI) in what it called an ‘off-market’
transaction. This transaction was said to have been executed over 10 trading
days between Monday 19 November to Friday 30 November with sales transactions
priced each day at market prices prevailing on that day. On average, the 200
tonne sales transaction would amount to 20 tonnes per day over a 10 day
trading period.
Note that the Reserve Bank of India revealed in 2013 that this 200
tonne gold purchase had merely been a book entry transfer,
and that the purchased gold was accessible for use in a US Dollar – Gold swap,
thereby suggesting that the IMF-RBI transaction was executed for gold held at
the Bank of England in London, which is the only major trading center
for gold-USD swaps. As a Hindu
Business Line article stated in August 2013:
“According to RBI sources, the gold that India bought never came into
the country as the transaction was only a book entry. The gold was purchased
for $6.7 billion, in cash.”
“The Reserve Bank of India bought 200 tonnes of gold for $1,045 an
ounce from the IMF four years ago. The Government can swap it for US
dollars,” said [LBMA Chairman David] Gornall.”
Two weeks after the Indian purchase announcement in November 2009, another
but far smaller off-market sale was announced by
the IMF on 16 November 2009, this time a sale of 2 tonnes of gold to the
Bank of Mauritius (the Mauritian central bank), said to have been executed
on 11 November 2009. Another two weeks after this, on 25 November
2009, the IMF announced
a third official sector sales transaction, this time a sale of 10 tonnes of
gold to the Central Bank of Sri Lanka.
Overall, these 3 sales transactions, to the Reserve Bank of India, Bank of
Mauritius and the Central Bank of Sri Lanka, totalled 212 tonnes of gold, and
brought the IMF’s remaining official gold holdings down to 3005.3 tonnes at
the end of 2009, leaving 191.3 tonnes of the 403.3 tonnes remaining to
sell. All 3 of the above announcements by the IMF were accompanied by
the following statement:
“The Fund will inform markets before any on-market sales commence, and
will report regularly to the public on progress with the gold sales.”
For nearly 3 months from late November 2009, there were no other
developments with the IMF’s gold sales until 17 February 2010, at which
point the IMF announced that it was to begin the ‘on-market’
portion of its gold sales program. At this stage you might be wondering what
the IMF’s on-market gold sales consisted of, which ‘market’ it referred to,
how were the sales marketed, who the buyers were, and who executed the sales
transactions. You would not be alone in wondering about these and many other
related questions.
The IMF’s press releases of 17 February 2010, titled ‘IMF to
Begin On-Market Sales of Gold’ was bereft of information and
merely stated that the IMF would “shortly initiate the on-market phase of
its gold sales program” following “the approach adopted successfully
by the central banks participating in the Central Bank Gold Agreement“,
and that the sales it would be “conducted in a phased manner over time”.
The third Central
Bank Gold Agreement (CBGA) ran from September 2009 to September
2014. These CBGA’s, which have been running since September 1999, ostensibly
claim to support and not disrupt the gold market but in reality have, in
their entirety, been highly secretive operations where vast amounts of
central bank and official sector gold is channeled via the BIS to unspecified
buyers in the bullion banks or central bank space, with the operations having
all the hallmarks of gold price stabilization operations, and/or official
sector gold redistribution between the world’s developed and emerging market
central banks.
The February 2010 announcement also made the misleading claim that “the
IMF will continue to provide regular updates on progress with the gold sales
through its normal reporting channels”. These regular updates have
happened.
An article titled “IMF
‘On-Market’ Gold Sales Move Ahead” in the ‘IMF Survey Magazine’, also
dated 17 February 2010 reiterated this spurious transparency claim:
“Transparent approach
The IMF publicly announced each official sale shortly after the
transaction was concluded. A high degree of transparency will
continue during the sales of gold on the market, in order to
assure markets that the sales are being conducted in a responsible manner.”
However, following this February 2010 lip service to transparency, there
were no direct updates from the IMF about the on-market gold sales, even
after the entire gold sales program had completed in December 2010.
One further IMF ‘off-market’ gold sale transaction was announced
on 9 September 2010. This was a sale of 10 tonnes of gold to Bangladesh Bank
(the Bangladeshi central bank) with the transaction said to have been
executed on 7 September 2010. Adding this 10 tonnes to the previous 212
tonnes of off-market sales meant that 222 tonnes of the 403.3 tonne total was
sold to central banks, with the remaining 181.3 tonnes sold
via ‘on-market’ transactions. The Bangladesh
announcement was notable in that it also revealed that “as of end July
2010, a further 88.3 metric tons had been
sold under the on-market sales announced
in February 2010″. The addition of Bangladesh to the off-market buyer
list that already consisted of India, Sri Lanka and Mauritius also resulted
in the quite bizarre situation where the only off-market buyers of IMF
comprised 4 countries that have extremely close historical, political,
cultural and economic connections with each other. Three of these countries,
India, Bangladesh and Sri Lanka, are represented at the
IMF by the same Executive Director, who from November
2009 was Arvind
Virmani, so their buying decisions were most likely coordinated through
Virmani and probably through the Reserve Bank of India as well.
On 21 December 2010, the IMF issued a press release titled ‘IMF Concludes
Gold Sales’ which stated:
“The International Monetary Fund (IMF) announced today the conclusion
of the limited sales program covering 403.3 metric tons of gold that was
approved by the Executive Board in September 2009.”
“The gold sales were conducted under modalities to safeguard against
disruption of the gold market. All gold sales were at market prices,
including direct sales to official holders.”
‘Modalities’ in this context just means the attributes of the sales
including the approach to the gold sales, i.e. the sales strategy. This
brief announcement on 21 December 2010 was again bereft of any factual
information such as which market was used for the ‘on-market’ gold sales, the
identity of executing brokers, the identity of counterparties,
transaction dates, settlement dates / deferred settlement dates, method of
sale, information on whether bullion was actually transferred between parties,
publication of weight lists, and other standard sales transaction details.
Contrast this secrecy to the 1976 -1980 IMF gold sales which were conducted
by a very public series auction, and which were covered in minute details by
the financial publications of the time.
As usual with its treatment of official sector gold transactions, the
World Gold Council’s Gold Demand Trends report, in this case its Q4 2010
report, was absolutely useless as a source of information about the IMF
gold sales beyond regurgitating the press release details, and there was
no discussion on how the gold was sold, who the agent was, who the buyers
were etc etc.
Lip Service to Transparency
When the IMF’s ‘on-market’ sales of 191.3 tonnes of gold commenced in
February – March 2010, there were attempts from various quarters to try to
ascertain actual details of the sales process. Canadian investment head Eric
Sprott even expressed interest in purchasing the entire 191.3 tonnes on
behalf of the then newly IPO’d Sprott Physical Gold ETF. However, Sprott’s
attempts to purchase the gold were refused by the IMF, and related media
queries attempting to clarify the actual sales process following the IMF’s
blockade of Sprott were rebuffed by the IMF.
A Business Insider article from 6 April 2010, written by Vince Veneziani
and titled “Sorry
Eric Sprott, There’s No Way You’re Buying Gold From The IMF”, lays
out the background to this bizarre stone-walling and lack of cooperation by
the IMF. Business Insider spoke to Alistair
Thomson, the then external relations officer at the IMF (now Deputy Chief
of Internal Communications, IMF), and asked Thomson why Sprott could not
purchase the gold that was supposedly available in the ‘on-market’ sales.
Thomson’s reply is summarised below:
“The IMF is only selling gold though a qualified agent. There is only
one of these agents at the moment and due to the nature of the gold market,
they won’t reveal who or what that agent is.”
“Sprott can’t buy the gold directly because they do not deal with
institutional clients like hedge funds, pension funds, etc. The only buyers
can be central bankers and sovereign nations, that sort of thing.”
The IMF board agreed months ago how they wanted to approach the sale
of the gold. Sprott is welcome to buy from central banks who have bought from
the IMF, but not from the IMF directly.”
While this initial response from the IMF’s Alistair Thomson contradicted
the entire expectation of the global gold market which had been earlier led
to believe that the ‘on-market’ gold sales were just that, sales of gold to
the market, on the market, Thomson’s reply did reveal that the IMF’s ‘on-market’
gold sales appeared to be merely an exercise in using an agent, most likely
the Bank for International Settlements (BIS) gold trading desk, to transfer
IMF gold to a central bank or central banks that wished to remain anonymous,
and not go through the publicity of the ‘off-market’ transfer process.
Although, as per usual, the servile and useless mainstream media failed to
pick up on this story, the IMF’s unsatisfactory and contradictory response
was deftly dissected by Chris Powell of GATA in a dispatch, also dated 6 April
2010. After discussing the IMF’s initial reply with Eric Sprott and
GATA, Business Insider’s Vince Veneziani then went back to IMF spokesman
Alistair Thomson with a series of reasonable and totally legitimate questions
about the ‘on-market’ gold sales process.
Veneziani’s questions to the IMF are documented in his follow-up Business
Insider article titled “Five
Questions About Gold The IMF Refuses To Answer”, dated 27 April 2010.
These questions included:
- What are the incentives for the IMF not to sell gold
on the open market or to investors, be it institutional or retail?
- Did gold physically change hands with the banks you
have sold to so far or was the transaction basically bookkeeping stuff
(the IMF still holds the physical gold in this case)?
- Are there available records on the actual serial
numbers of bullion? How is the gold at the IMF tracked and accounted
for?
- Does IMF support a need for total transparency in
the sale of gold despite the effects it could have on various markets?
Shockingly, Alistair Thomson, supposedly the IMF press officer responsible
for answering the public’s queries about IMF finances (including gold sales),
arrogantly and ignorantly refused to answer any of the questions, replying:
“I looked through your message; we don’t have anything more for you on
this.”
Another example of the world of IMF transparency, where black is white and
white is black, and where press officers who have formerly worked in
presstitute financial media organisations such as Thomson Reuters fit in
nicely to the IMF’s culture of aloofness, status quo protection, and lack of
accountability to the public.
Monthly Report on Sales of Gold on the Market
Fast forward to July 2015. While searching for documents in the IMF online archives related
to these gold sales, I found 3 documents dated 2010, titled “Monthly
Report on Sales of Gold on the Market“. Specifically, the 3 documents
are as follows (click on links to open):
Each of these 3 documents is defined by the IMF as a Staff Memorandum
(SM), which are classified as ‘Executive Board Documents’ under its
disclosure policy. The IMF Executive Board consists of 24 directors in
addition to the IMF Managing Director, who was in 2009 the
aforementioned Dominique Strauss-Kahn. According to the IMF’s Executive Board synopsis
web page, the board “carries out its work largely on the basis of papers
prepared by IMF management and staff.”
The most interesting observation about these 3 documents, apart from their
contents which we’ll see below, is the fact that only 3 of these documents
are accessible in the IMF archives, i.e. the documents only run up to May
2010, and do not include similar documents covering the remainder of the
‘on-market’ sales period (i.e. May – December 2010). Therefore there are 7
additional monthly reports missing from the archives. That there are additional
documents that have not been published was confirmed to me by IMF Archives
staff – see below.
Each of the 3 reports is only 3 pages long, and each report follows a
similar format. The first report spans February – March 2010,
specifically from 18 February 2010 to 17 March 2010, and covers the
following:
“summarizes developments in the first month of the on-market sales,
covering market developments, quantities sold and average prices realized,
and a comparison with widely used benchmarks, i.e., the average of London
gold market fixings“
‘Market developments’ refers to a brief summary in graphical chart of the
London fixing prices in US Dollars over the period in question. Quantities
sold and the currency composition of sales are notable:
Sales Volume and Proceeds: A total of 515,976.638 troy ounces (16.05
metric tons) of gold was sold during the
period February 18 to March 17. These sales generated
proceeds of SDR 376.13 million (US$576.04 million), based on the Fund’s
representative exchange rates prevailing on the day of each sale transaction.
Currency Composition of Proceeds: Sales were conducted in the four
currencies included in the SDR valuation basket …., with the intention of
broadly reflecting the relative quota shares of these currencies over the course
of the sales program.
The 4 currencies in which the sales were conducted during the first month
were USD, EUR, GBP and JPY. See table 1 in the document for more information.
Perhaps the most revealing point in each document is the confirmation of
the use of an agent and specifically an arrangement that the sales prices
included a premium paid by the agent:
Sales Prices compared with Benchmarks: The sales were implemented as
specified in the agreement with the agent. Sales
were conducted at prices incorporating a premium paid by the agent over the
London gold fixing, and for sales settled in currencies
other than the U.S. dollar, the sales price also reflects market exchange
rates at the time of the London gold fixings (10:30 am and 3:00 pm GMT), net
of a cost margin.
The use of a premium over the London fixing price is very revealing
because this selling strategy, where the agent paid a premium over the
average London gold fixing price, is identical to the sales
arrangement which the Swiss National Bank (SNB) agreed with the Bank for
International Settlements (BIS) when the BIS acted as sales agent for SNB
gold sales over the period May 2000 to March 2001.
As Philipp Hildebrand, ex-governor of the SNB, revealed in 2005 when
discussing the SNB gold sales strategy that had been used in 2000-2001:
“At the outset, the SNB decided to use the BIS as its selling agent.
Between May 2000 and March 2001, the BIS sold 220 tonnes on behalf of the
SNB. For the first 120 tonnes, the SNB paid the BIS a fixed commission while
the performance risk resided with the SNB. For the next 100
tonnes, the BIS agreed to pay the average price of the AM and PM London gold
fixing plus a small fixed premium.“
My conclusion is therefore that the IMF also used the Bank for
International Settlements in Basel, Switzerland as selling agent for
its ‘on-market’ gold sales over the period February to December 2010, with
the sales benchmarked to average London fixing prices in the London Gold
Market.
The pertinent details for the IMF’s March – April sales document are as
follows:
“A total of 516,010.977 troy ounces (16.05 metric tons)
of gold was sold during the period March 18 to April 16.”
“Sales were conducted in three of the four currencies included in the
SDR valuation basket” i.e. USD, EUR and JPY”
The relevant details from the April – May sales document are as follows:
“A total of 490,194.747 troy ounces (15.25 metric tons)
of gold was sold during the period April 19 to May 18, 2010; no sales were
conducted during the last two business days in April, owing to end of
financial year audit considerations.”
“Sales were conducted in three of the four currencies included in the
SDR valuation basket” i.e. USD, GBP and JPY
Purely a Pricing Exercise?
The entire ‘on-market’ gold sales program of 181.3 tonnes may well
have been just a pricing exercise by the Bank for International Settlements
gold trading desk to determine the market prices at which to execute the
transfers, with the gold transferring ownership after the event as book entry
transfers at the Bank of England in the same manner as was applied to the
Indian ‘off-market’ purchase of 200 tonnes.
Taking the sales quantities in the 3 published monthly reports, and
incorporating quarterly IMF gold holdings time series data from the World
Gold Council, its possible to calculate how much gold was ‘sold’ each single
day over the entire ‘on-market’ gold sales program. As it turns out, for much
of the program’s duration, identical quantities of gold were sold each and
every day. The ‘on-market’ program commenced on 18 February 2010.
Between 18 February and 17 March, which was a period of 20 trading days in
the London gold market, the agent sold 515,976.638 troy ounces (16.05
metric tons) of gold. Between 18 March and 16 April, which was also
a trading period of 20 trading days (even after factoring in 2 Easter bank
holidays), the agent sold a practically identical quantity of 516,010.977
troy ounces (also 16.05 metric tons). This is a daily sales
rate of 25,800 ozs or 0.8025 tonnes per
trading day over these 40 trading days.
During the period from 19 April to 18 May 2010, which was 19 trading
days excluding the 3rd May UK bank holiday and excluding the last 2 trading
days of April on which the IMF program didn’t trade, the agent sold
490,194.747 troy ounces (15.25 metric tons) of gold, which again is…wait for
it… 0.8025 tonnes and 25,800 ozs per day (0.8025 * 19 = 15.2475 tonnes
& 25,800 * 19 = 490,200 ozs).
Following the combined Indian, Mauritian, and Sri Lankan ‘off-market’
purchases of 212 tonnes during Q4 2009, the IMF’s gold holdings stood at
3,005.32 tonnes at the end of 2009. Based on World Gold Council
(WGC) quarterly
data of world official gold reserves, the IMF’s gold holdings then
decreased as follows during 2010:
– 24.08 MT (Q1) – 47.34 MT (Q2) – 67.66 MT (Q3) – 52.2 MT (Q4) = –
191.28 metric tonnes (MT)
…resulting in total remaining gold holdings of 2,814.04 tonnes
at the end of 2010, an IMF gold holdings figure which remains unchanged to
this day.
These WGC figures tally with the IMF monthly report figures. For example,
the IMF says that 16.05 tonnes was sold up to and including 17 March, and
with another 10 trading days in March 2010, a further 8.205 tonnes (0.8025
daily sales * 10) was sold by the end of March, giving total Q1 sales of
16.05 + 8.025 = 24.075 tonnes, which is identical to the WGC quarterly change
figure. The IMF was active on 59 trading days in Q2 during which it
sold 47.34 tonnes, which…wait for it…was an average of 0.8024 tonnes per
day (47.34 / 59 = 0.8024).
Therefore, over Q1 and Q2 2010 (i.e. between February and the end of June
2010), the ‘on-market’ sales program sold 71.42 tonnes at a consistent ~
0.8025 tonnes daily rate. This would suggest an algorithmic program trade
which offered identical quantities each and every day, or more likely just
priced these quantities so as to arrive at a sales consideration amount so
that the IMF would receive ‘market prices’ for its gold. Recall that IMF gold
has to be sold at market prices according to the Fund’s Articles of
Agreement.
Given that 88.3 tonnes had been sold ‘on-market’ by the end of July 2010
as the IMF revealed in its Bangladesh announcement, we can infer that 16.88
tonnes was sold ‘on-market’ during July 2010. This 16.88 tonne
sale in July was actually at a slightly lower pace than previous months
since there were 22 trading days in July 2010, however the figure was chosen
due to the following: With 191.3 tonnes on sale at the outset of the
‘on-market’ program, and 71.42 tonnes sold by the end of June, this left
119.88 tonnes to sell at the end of June. Whoever was choosing the
monthly sales quantities wanted to finish July with a round figure of 103
tonnes, and so chose 16.88 tonnes to sell in July (i.e. 119.88 – 16.88 = 103
tonnes). Subtracting the 10 tonnes that Bangladesh bought in September 2010
(which would have been also factored in at that time) left a round 93 tonnes
(2.999 million ozs) to sell as of the beginning of August.
The Q3 2010 sales of 67.66 tonnes comprised
the 10 tonne ‘off-market’ sale to Bangladesh on 7 September and 57.66 tonnes
of on-market sales. Given 16.88 tonnes sold in on-market sales in July,
there was therefore 40.78 tonnes sold over August – September, or an average
of 20.39 tonnes in each of August and September (which represented a combined
43 trading days). Overall, there were 65 trading days in Q3 and 58 trading
days in Q4 (assuming that the sales wrapped up on 21 December as per the IMF
announcement). From the beginning of August to the 21 December, a period of
101 trading days, the IMF sold the remaining 93 tonnes, which would be a daily
sales pace of 0.93 tonnes per day.
Given that the IMF’s 4 gold depositories are the Federal Reserve Bank of
New York, the Bank of England in London, the Banque de France in Paris and
the Reserve Bank of India in Nagpur India, and given
that the IMF gold in New York is mostly in the form of US Assay Office melts,
and the gold in Nagpur is a hodgepodge of mostly low quality old gold (read
non-good delivery gold), then it would be logical for the IMF to sell some of
its good delivery gold which is stored in London (which, until at least the
late 1970s, was predominantly held in the form of Rand Refinery 400 oz gold
bars), or even in Paris, since the Banque de France has been engaged in an
ongoing program of upgrading the old US Assay office gold bars in its custody
to good delivery bars.
As the Banque de France’s Alexandre Gautier commented in his
2013 speech to the LBMA annual conference in Rome:
“Our bars are not all LGD [London Good Delivery quality], but we have
an ongoing improvement programme.”
This Banque de France gold bar upgrading program was also confirmed in
February 2011 in a National Geographic Magazine article which
stated:
“Buyers don’t want the beat-up American gold. In a nearby room pallets
of it are being packed up and shipped to an undisclosed location, where the
bars will be melted down and recast in prettier forms.”
Top Secret Foot Notes
There are 2 interesting footnotes on page 1 or each of the 3 above
documents. The first footnote states that ‘The Executive Board was
briefed on the plans for on-market sales prior to the announcement’, the
announcement in question being the IMF’s 17 February 2010 announcement IMF to Begin
On-Market Sales of Gold.
The second footnote, which is a footnote to a sales process and sales
performance summary, refers to 2 further IMF papers as follows: “Modalities
for Limited Sales of Gold by the Fund (SM/09/243, 9/4/09) and
DEC/14425-(09/97), 9/18/09“.
As mentioned above, SM are Staff Memorandums which are classed
under Executive Board Documents. DEC series document are ‘Text of Board Decisions’
(hence the DEC) and these documents are also deemed to be Executive Board
Documents. After searching for both of these documents (SM/09/243 and
DEC/14425-(09/97)) in the IMF archives, it became apparent that they were not
there, i.e. they were not returned and not retrievable under IMF archive
search results.
This was surprisingly since the IMF claims to have what it calls its
“IMF Open Archives Policy”, part of which is Article IX, Section 5, which is
the “Review
of the Fund’s Transparency Policy—Archives Policy“. This policy,
prepared by the IMF Legal Department includes the following:
Access will be given as follows:
- 2. (i) Executive Board documents that are
over 3 years old
(ii) Minutes of Executive Board meetings that are over 5 years old;
(iv) Other documentary materials maintained in Fund archives over 20
years old.
- 3. Access to Fund documents specified in paragraph 2
above that are classified as “Secret” or “Strictly
Confidential” as of the date of this Decision will be
granted only upon the Managing Director’s consent
to their declassification. It is understood that this consent will be
granted in all instances but those for which, despite the passage of
time, it is determined that the material remains highly
confidential or sensitive.
Given that the 2 above gold sales documents, as well as 7 other monthly
reports about ‘on-market’ gold sales were missing from the archives, but
all the while the IMF claimed its on-market gold sales to be “Transparent”,
the next logical step was to contact the IMF Archives people and seek
explanations. What follows below is the correspondence I had with the IMF
Archives staff. The IMF Archives staff were very helpful and their
responses were merely communicating what they had found in their systems or
had been told ‘from above’. My questions and emails are in blue text.
The IMF replies are in red text. My first set of queries were about the
SM/09/243 and DEC/14425 documents:
02 August 2015: My first question
Hello Archives,
I’m looking for IMF document SM/09/243 “Modalities for
Limited Sales of Gold by the Fund” (Sept 4th 2009) in the IMF Archives
catalog (http://archivescatalog.imf.org/search.aspx). However,
SM/09/243 does not appear to be in the online Archives.
But, for example SM/09/242 and SM/09/244 are both
retrievable in the searchable archives, but not SM/09/243.
Can you clarify where SM/09/243 is?
02 August 2015: My second question
Hello Archives,
Could you clarify how to search for and retrieve a
document in the IMF online Archives that has reference “DEC/14425-(09/97)”
This document is dated 9/18/09. I cannot find it
using any of the search parameters.
3 August: IMF Archives reply
Thank you for contacting the IMF Archives. Both documents you
are referring to in your recent communication, SM/09/243 and
DEC/14425, are not available to the public. Please visit our website
to consult on IMF Policy on
Access to the Archives.
3 August: me
Can you clarify why these documents are not available to the public? i.e.
have they received a certain classification?
4 August: IMF Archives
You are absolutely right, despite the time rule, these two
documents are still closed because of the information security
classification. We hope it answers your question.
4 August: me
Thanks for answer. Would you happen to know when (and if) these files will
be available…..assuming it’s not a 20 year rule or anything like that.
5 August: IMF Archives
Could you please provide some background information about your
affiliation and the need to obtain these documents. Classified
documents undergo declassification process when such a request is submitted.
It can be a lengthy process up to one year.
5 August: me
I was interested in these specific documents because I am
researching IMF gold sales for various articles and reports that
I’m planning to write.
6 Aug: IMF
Thank you for providing additional information regarding your
inquiry. Please send us a formal request for the declassification
of these two documents specifying your need to have access to them.
We will follow through on your behalf and get back to you with a
response.
Before I had replied with a formal request, the IMF archives people
contacted me again on 12 August 2015 as follows:
12 Aug: IMF
While waiting for your official request we made preliminary inquiries
regarding the requested documents. The decision communicated back to
us is not to declassify these documents because of the sensitivity
of the subject matter.
In the meantime, we want to make sure you have checked publicly available
documents on the same topic accessible from the IMF.org: https://www.imf.org/external/np/sec/pr/2009/pr09310.htm
12 August: me
Thank you for the clarification. That’s surprising about the
classification given that the IMF on-market gold sales were
supposed to be transparent.
Was there any information fed back to Archives on why the
‘subject matter’ is deemed sensitive?
14 Aug: IMF Archives
“Thank you for your follow-up email. Unfortunately, these
particular documents are still deemed classified and no further explanation
has been communicated to the Archives.”
My next set of questions to IMF Archives in August 2015 addressed the 7
missing monthly gold sales reports that should have covered May – December
2010. Since there is a 3 year rule or maybe at max a 5 year rule under the
IMF’s Transparency Policy (Archive Policy), I thought that maybe the
May/June, June/July, and July/August 2010 files might be due for
automatic release under the 5 year rule by the end of August 2015.
22 August 2015: Me:
“I have a question about documents which appear in the online Archive
after the 5 year schedule.
Is there a scheduled update or similar which puts newly available
documents in the Archive when the 5 years has elapsed?
For example, I see some documents in the Archive from June 2010, but not
July/August 2010. Is there an automated process that runs, but that hasn’t
yet run for July/August 2010, that puts the latest documents into the
publicly available Archive?”
24 August: IMF
“Thank you for your inquiry. The review and declassification of
eligible documents that meet the time rule is done by batches. Therefore,
publication does not happen in real time. It is a process that takes
time and might cause a delay. We will let you know when July and August
documents are posted.”
2 October 2015: me
“Do you know when documents from June 2010 onwards will be added to the
IMF online archive? I still don’t see any yet.
Is there a batch of declassifications for June 2010 / July 2010 / August
2010 happening soon?”
2 October: IMF
“Thank you for contacting the IMF Archives. Unfortunately, we are unable
to speculate about the documents website availability and provide a more
specific timeframe than the one already communicated in the attached
correspondence. As already promised, we will let you know when July and
August documents are posted.”
Then about 30 minutes later (on 2 October 2015) the IMF sent me
another email:
2 October: IMF
“Dear Mr. Manly,
I ran a sample search of Executive Board minutes available via IMF
Archives catalog and was able to find minutes issued in June and July 2010.
Is there a specific document you are looking for which you are unable to
find?
Sincerely”
2 October: Me
“I was searching for the next months’ reports in the below series, report
name “Monthly Report on Sales of Gold on the Market” – see screenshot
attached.
The current search retrieval brings back 3 reports spanning February- May
2010, but nothing after May 2010. Report names in the retrieved search
results are:
SM/10/69
SM/10/102
SM/10/139”
I was wondering if a couple of months in this series after May 2010 are
available now?”
5 October: IMF
“The reports after May 2010 haven’t been declassified for public
access because of the sensitivity of the subject matter, and
therefore they are not available for retrieval.
We apologize for any inconvenience this may cause.”
5 October: Me
“Thanks for the reply. Out of interest, why were the reports from February
to May 2010 declassified, since surely the June-December 2010 monthly reports
are identical to the first three months in that they are also just providing
monthly updates on the same batch of gold ~180 tonnes of gold which was being
sold over the 10 month period?”
7 October: IMF
“Dear Mr. Manly,
This series of reports is under review at the moment, and
according to security classification they are currently closed.
Sincerely,
IMF Archives”
And there you have it folks. This is IMF transparency. As per the IMF
Archive disclosure policy, only Christine Lagarde, current IMF Managing
Director, has the authority to consent to the declassification of classified
gold sales documents concerning the Wall Street Journal’s favorite ‘Pet
Rock’.
Sensitivity of Subject Matter – China and Bullion Banks
The above IMF responses speak for themselves, but in summary, here we have
an organization which claims to be transparent and which claims to have run a
transparent ‘on-market’ gold sales program in 2010, but still after more than
6 years it is keeping a large number of documents about the very same gold
sales classified and inaccessible to the public due to the ‘sensitivity of
the subject matter’. What could be so sensitive in the contents of these documents
that the IMF has to keep them classified? Matters of national security?
Matters of international security? And why such extremely high level security
for an asset that was recently described by a gold deriding journalist from
the Wall Street Journal as a ‘Pet Rock’?
The secrecy of keeping these documents classified could hardly be because
of sensitivity over the way in which the sales were executed by the
agent, since this was already revealed in the February – May reports that
are published, and which looks like a normal enough gold sales program
by the Bank for International Settlements on behalf of the IMF? Could it
be to do with the identities of the counterparties, i.e. the buyer(s) of the
gold? I think that is the most likely reason.
Two counterparties that spring to mind that might request anonymity in the
ridiculously named ‘on-market’ sales process would be a) the Chinese State /
People Bank of China, and b) a group of bullion banks that were involved in
gold swaps with the BIS in 2009/2010.
Chinese discretion – Market Speculation and Volatility
Bearing in mind another one of the IMF’s mantras during the 2009-2010 gold
sales processes that it wanted to “avoid disruption of the gold market”, and
the Chinese State’s natural surreptitiousness, the following information
reported
by China Daily on 24 February 2010 (which was the first week of
‘on-market’ sales) is worth considering. The article, titled ‘China
unlikely to buy gold from the IMF‘, stated the following:
“Contrary to much speculation China may not buy the International
Monetary Fund’s (IMF) remaining 191.3 tons of gold which is up for sale as
it does not want to upset the market, a top industry
official told China Daily yesterday.
“It is not feasible for China to buy the IMF bullion,
as any purchase or even intent to do so would trigger market speculation and
volatility,” said the official from the China Gold
Association, on condition of anonymity.”
To me, these comments from the ‘anonymous’ China Gold Association official
are a clear indication that if China was the buyer of the remaining 181.3
tonnes (ie. 191.3 tonnes – 10 tonnes for Bangladesh), then China certainly
would have conducted the purchase in secrecy, as ‘it does not want to
upset the market’, and “any purchase or even intent to do so would
trigger market speculation and volatility”
In the same China Daily article, there was also a comment reported from
Asian Development Bank economist Zhuang Jian, who was in favor of China
buying the IMF gold, as he thought that “buying IMF gold would not only
help China diversify its foreign exchange reserves but also strengthen the
yuan as an international currency”, and that China would “have
a bigger say in the IMF through the gold purchasing deal”.
Zhuang Jian also stated that “China can start with small purchases on
the international market like the 191.3 tons of IMF gold. In the short-term,
the market will see volatility, but in the long-term the prices will return
to normal”.
BIS Swaps and Bullion Bank Bailouts
In late June 2010, the Bank for International Settlements (BIS)
published its annual
report to year-end March 2009. This report revealed that the BIS had,
during its financial year, taken on gold swaps for 349 tonnes. The Wall
Street Journal (WSJ) initially reported in early July 2010 that these swaps
were with central banks, however the BIS
clarified to the WSJ that the gold swaps were in fact with commercial
banks. The Financial Times then reported
in late July 2010 that “Three big banks – HSBC, Société Générale and
BNP Paribas – were among more than 10 based in Europe that swapped gold with
the Bank for International Settlements.” Notice that two of the named
banks are French banks.
Since the BIS refuses to explain anything material about these swaps,
which was most likely a gold market fire-fighting exercise, the details
remain murky. But the theory that best explains what actually happened was advanced by the late Adrian Douglas of
GATA in early July 2010. Douglas proposed that bullion bank
gold bailout tripartite transactions actually created the BIS gold swaps.
Since IMF gold is stored at both the Bank of England vaults in London and at
the Banque de France vaults in Paris, IMF ‘on-market’ gold held in Paris or
London is very easy to transfers to a group of bullion banks who all hold
gold accounts at the Bank of England and, it now appears they also hold gold
accounts at the Banque de France.
In May 2012, George Milling-Stanley, formerly of the World Gold Council,
provided some insight
to the publication Central Banking about the role of the Banque de France
in being able to mobilize gold. Milling-Stanley said:
“Gold stored at the Bank of England vaults … can easily be mobilised
into the market via trading strategies, or posted as collateral for a
currency loan”
‘Of the Banque de France, Milling-Stanley says it has ‘recently become
more active in this space [mobilising gold into the market], acting
primarily as an interface between the Bank for International Settlements in
Basel [BIS] and commercial banks requiring dollar liquidity.
These commercial banks are primarily located in Europe, especially in
France’.”
It’s interesting that two of the three banks named by the Financial Times
as being involved in the BIS gold swaps are French, and that Milling-Stanley
mentioned that most of the commercial banks that interfaced with the BIS are
French banks. Given that the then Managing Director of the IMF, Dominique
Strauss-Kahn, is French, as is his successor Christine Lagarde, could some of
the ‘on market’ IMF gold sales been a case of the French controlled IMF
bailing out French bullion banks such as SocGen and BNP Paribas?
Applied to the IMF gold sales, and under a tripartite transaction, as I
interpret it, the following transactions would occur:
IMF gold is transferred by book entry to a set of bullion banks who then
transfer the title of this gold to the BIS. The BIS transfers US dollars to
the bullion banks who then either transfer this currency to the IMF, or owe a
cash obligation to the IMF. The sold gold is recorded in the name of the BIS
but actually remains where it is custodied at the London or Paris IMF Gold
Depositories, i.e. at the Bank of England or Banque de France vaults.
In this scenario, the IMF gold could have been transferred to bullion
banks and further transferred to the BIS during 2009, with the ‘on-market’
pricing exercise carried out during 2010. With the BIS as gold sales agent,
the entire set of transactions would be even more convenient since the BIS
gold trading desk would be able to oversee the gold swaps and the gold sales.
So, in my opinion, the IMF ‘on-market’ gold on offer was either a) bought
by the Chinese State, or b) was used in a gold market fire-fighting
exercise to bail out a group of bullion banks, or c) a combination of the
two.
Modalities of Gold Sales
As to why the IMF paper “Modalities for Limited Sales of Gold by the Fund”
(Sept 4th 2009) SM/09/243″ is under lock and key and can only be declassified
by the IMF Managing Director Christine Lagarde, the conclusion is
that it too must contain references to something that the IMF are extremely
worried about allowing into the public domain. For the simple reason is that
a similarly named IMF paper from 25 June 1999, titled “Modalities
for Gold Sales by the Fund” (EBS/99/110)” is accessible in the IMF
Archives, and while revealing in a number of respects, it hardly contains
‘sensitive material’. This paper was prepared when the IMF had been thinking
about conducting gold sales back in 1999 which never materialized, except in
the form of an accounting trick to sell to and simultaneously buy back a
quantity of gold to and from Mexico and Brazil. This 1999 paper “Modalities
for Gold Sales by the Fund” is very interesting though for a lot of reasons
as it sketches out the limitations on IMF gold sales, the approaches to the
sales that were considered by the IMF at that time, and it’s also is full of
pious claims that the gold sales process should be ‘transparent’, such as the
following:
“it will be critical to ensure transparency and accountability of the
Fund’s gold operations through clear procedures for selecting potential
buyers and determining prices, and through public disclosure
of the results of the sales after they have taken place. The
need for transparency and evenhandedness, which is essential
for an international financial institution, argues
for providing as much information as possible to the public.”
On the actual approaches to gold sales, the 1999 Modalities paper
introduces the topic as follows:
“This paper considers four main modalities for the sale of gold by the
Fund: (i) direct sales to another official holder of gold;
(ii) placements into the market through a private intermediary or a group of
intermediaries, such as bullion banks; (iii) placements into
the market through the intermediation of a central bank with experience in
gold sales or the BIS; and (iv) direct sales to the market
through public auctions, as was the case with the gold sales by the Fund
between 1976 and 1980″
On the topic of publication of sales results, the 1999 paper states:
“Publication of results: In all cases, the Fund would
make public at regular, say monthly, intervals the quantity sold and the
prices obtained, as well as, depending on the modality decided by the Board,
the names of the buyers. In the case of a forward sales
strategy involving an intermediary, the Fund would make public the quantities
and delivery dates of the forward sales. It would be for consideration
whether the Fund would announce the names of the intermediaries selected by
the Fund to sell the gold, if that modality would be chosen”
On the topic of limitations to IMF gold sales, the 1999 paper says:
“Under the Articles, the Fund is only authorized to
sell gold; that is, to transfer ownership over gold on the
basis of prices in the market, taking into
account reasonable transactions costs. The Articles prescribe the objective
of avoiding the management of the price, or
the establishment of a fixed price, in the gold market (Article V, Section 12
(a)). This implies that the Fund “must seek to follow and not
set a direction for prices in the gold market.“
Under the Articles, the Fund cannot engage in gold
leasing or gold lending operations, enter into gold swaps, or participate in
the market for gold options or other transactions that do not involve the
transfer of ownership over gold.”
IMF Comedians
In conclusion, for sheer comedy reading, there is a tonne of
material in the IMF’s latest ‘transparency’
smoke and mirrors claims, dated 24 March 2016, which contains such comedy
gems as:
“Greater openness and clarity by the IMF about
its own policies and the advice it provides to its member countries
contributes to a better understanding of the IMF’s own role and operations,
building traction for the Fund’s policy advice and making it easier to hold
the institution accountable.
Outside scrutiny should also support the quality of surveillance and
IMF-supported programs.”
“The IMF’s efforts to improve the understanding of its operations and
engage more broadly with the public has been pursued along four broad lines:
(i) transparency of surveillance and IMF-supported programs, (ii)
transparency of its financial operations; (iii) external and internal review
and evaluation; and (iv) external communications.”
“The IMF’s approach to transparency is based on the overarching
principle that it will strive to disclose documents and information on a
timely basis unless strong and specific reasons argue against such
disclosure.”
By now you will begin to see that the IMF’s interpretation of
transparency diverges massively from any generally accepted interpretation of
transparency. The IMF appears to think that merely confirming that a gold
sale took place or will take place is the epitome of transparency, when it
would more accurately be described as obfuscation and a disdain for actual
communication with the public. IMF transparency is anything but transparent.
Perhaps the usually useless mainstream financial media may finally sit up
and next time they bump into the IMF’s Ms Lagarde at a press conference, ask
her why the IMF continues to block access to its 2010 gold sales documents,
which remain classified due to, in the IMF’s own words, “the sensitivity
of the subject matter”. Here’s hoping.
Ronan Manly
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