10/7 David Walker - Bombshell From The IMF? Announcement Around the Corner?

Bombshell From The IMF?

Announcement Around the Corner?



Over the last few years, gold investors have gotten used to getting slammed with announcements to
force down the gold price. Right about the time you are thinking"A few more bucks and I will break
even". Of course it was not to be as the"dreaded announcement" slips out and slam bam, the price of
gold goes back in the toilet. You the investor are left lying on the ground having sustained another
body slam.

Those that have been around awhile are quite familiar with the routine. Greenspan will say something
like"Inflation is being over stated by 1%." That one was good for an immediate lopping of five bucks
off the gold price. The more recent ones are the Bank of England announcements of gold auctions,
Swiss sales, Kuwait leasing, Paraguay sales, IMF sales and so on. Just when you least expect it and
are thinking that this one is in the bag, prepare, the body slam is coming.

It’s up periscope time to look around and see where the next dirty trick announcement will come
from. The gold price is holding firm and smacking the ceiling at $292 per ounce, the line in the sand
that puts the CB crowd in red alert territory.

The golden years of producer hedging are over. Potential supplies for sale are dwindling. What to do?
Well, they can sell the ounces that are returned or delivered into hedges by the miners. Perhaps this
was not the original intent behind the gold leasing when they entered into the transaction. Now they
are left with little choice.

Organizations like the BIS and the BOE have gold on"deposit" by other central bankers. This means
that the gold has been loaned out to other parties in exchange for interest. They are now liable for the
return of the gold and thus have a lot at stake. In some instances, the gold goes to a bullion bank and
then to a miner. There are now three parties between the original CB that put the gold on deposit and
getting the gold back.

The Bank of England for instance has to look out not only for the health of the bullion bank, but the
miner as well. Their customer’s gold is at risk here!

You know that they are going to do something. They are going to pull out the ace form the sleeve
and deploy it with much fanfare and repeated announcements. What will it be? What have we
overlooked this time? This is where the IMF will likely come into play.

In September of 1997, the Board of Governors of the IMF voted in a doubling of SDR allocations to
42.87 billion with the approval of the Fourth Amendment to the Articles of Agreement of the IMF.
The proposal will become effective when three fifths of the IMF membership (110 members) having
85 percent of the total voting power have accepted it. As of mid-August, 2001, 109 members having
72.18 percent of the total voting power had accepted the proposed amendment. Thus, approval by
the United States, which holds 17.16 percent of the voting power, would put the amendment
into effect.

For whatever reason, the United States and a likely list of cronies have been holding up the Forth
Amendment for the last four years. We can only speculate on the reasons for doing so, but it is likely
somehow tied to the strong dollar policy of recent years. In any event, it is now hinging on the stroke
of the pen by the United States.

In 1969 the IMF created the SDR, an artificial currency unit defined as a basket of national
currencies. The SDR is used as an international reserve asset, to supplement members' existing
reserve assets (official holdings of gold, foreign exchange, and reserve positions in the IMF).

The likely scenario would be that the US approves the SDR allocations along with the announcement
that CB’s will be replacing outdated gold reserve assets with the SDR’s

The current conversion of SDR to USD is $1.2827, thus the new number of allocations created will
be 21.43 billion SDR or 27.59 billion USD. That converted to gold equates to 95,141,810 oz at $290.
That’s a potential of 2,959 metric tonnes.

Whether or not this is actually done on any large scale is not as significant as the temporary
psychological impact of such an announcement.

Any such announcements forthcoming from the CB’s or IMF should be taken as a last opportunity to
buy on the cheap, as in the current environment, the effects will be only temporary in the face of
accelerated demand.

http://www.imf.org/external/np/exr/facts/sdr.htm

David Walker
10/05/01
oneandthesame@hotmail.com










Copyright 1999, 2000 Le Metropole Cafe. All rights reserved.




<center>

<HR>

</center>