IMF gold sale...who are you kidding?

Gold continues to work its way higher, and silver is doing even better, while the global stock markets have staggered through the new year.  So there's only one thing to do...sell the International Monetary Fund's gold reserves!

I have seen our government do some stupid things in the past, but this ranks up there with the best (or worst) of them.  It is clear that the government will try anything to hold down the price of gold as long as possible, but this won't help much.

More likely, they are threatening to sell gold, and hoping to shake out some speculators from the long side.  But what would happen if the IMF actually sold its gold?  As I write this, gold is $908/oz, which is about $29/gram, or $29 million/ton.  I'm not sure how much gold the IMF really has.  I have heard 3200 tons, and they claim 4000 tons.  I will give them the benefit of the doubt and when I multiply 4000 tons by $30 million/ton (it's late so I'm using round numbers) I get $120 billion.  So the IMF proposes to raise $120 billion by selling off ALL of its gold.

This assumes the IMF really has 4000 tons, and that none of it is encumbered, i.e. already covertly leased or sold with the usual lack of transparency.  It also assumes that selling 4000 tons won't crush the price of gold, and the IMF will collect its full $120 billion.

Now consider that China has about $1.5 TRILLION worth of US Treasury bonds that are worth less almost every day, that they would love to get rid of.  Then consider the other Asian countries (except Japan, which has large $ reserves, but is beholden to us, so it plays its part as US Fed East) and Russians and Arabs that would jump at the chance to diverify their reserves out of the US dollar.  How long will that $120 billion worth of gold last in this economic climate?

This proposed sale reminds me of Gordon "Goldfinger" Brown selling half of the Bank of England's gold reserves a decade ago, after first telegraphing his intentions.  The sale went through at the lowest gold price in a generation, and he cost his country billions of pounds, but there was a happy ending.  He was rewarded for his efforts by being elected Prime Minister.  I'm not kidding, this really happened.

This IMF sale is ten times larger, and about a hundred times stupider.  At least the dollar was strong when Goldfinger sold England's treasure.  Now there is no excuse.  So if there is a temporary decline in the gold price, load the boat.  All the IMF sale would do is hasten the world's ongoing transfer of wealth from West to East .