With regard to the IMF sales, let me point out a couple facts of which most observers are unaware. First, the IMF gold is based on member pledges, as opposed to an outright physical allocation of gold. The issue here is whether or not the sales of IMF gold will involve the outright sale of physical gold, which would require member countries to physically mobilize and sell their pro rata pledged gold, or if the IMF will settle for the cash equivalent. In other words, will IMF member gold pledges be monetized with cash?

 

This is an important issue with regard to whether or not the market has already discounted into the price of gold an expecation of a big physical sale of gold by the IMF. If that's the case, then the market price already reflects the very well telegraphed and highly publicized event. If it is the case that countries like the U.S. - with large gold pledge requirements and suspected reduced bullion stock on hand - decide to settle their gold pledge requirements with cash, then the market price of gold may actually move a lot higher once the market perceives that there will not be an actual physical sale of gold from the IMF. This brings us to the question of China and American Barrick.

 

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