The International Monetary Fund can be defined as the pool of money which can be accessed by different nations around the world. This pool of money is viewed as a loan, i.e. it is meant for growth and investment purposes. The finances belonging to IMF works more or less like a framework promoting international co-operation as far as the monetary field is concerned. Member countries have been able to make use of a multilateral payments system thanks to this framework. Also, the framework helps in stabilizing exchange rates and eliminating restrictions pertaining to foreign exchange.
As far as IMF and gold sales are concerned, the IMF certainly holds a vast amount of gold. Out of all the assets, gold is useful to the IMF because it helps in meeting unforeseen contingencies and also helps in maintaining financial soundness. Currently, the International Monetary Fund holds close to 90.5 million ounces of gold. These are stored at respective designated depositories. As per 2012, the value of the total gold holdings of the IMF is about one hundred and sixty billion US dollars. The reason why gold is given so much importance is because it plays a pivotal role in the international monetary system.
The yellow metal, i.e. gold, is extremely important for the economy too. When torments prevail in the financial markets, investing in gold is the best way to protect one’s savings. Various Central Banks around the world purchases gold whenever they would like to enhance their reserves. Also, gold plays a very important role during times of inflation. Gold is universally appealing because it is accepted everywhere. Since gold has quite a significant value, therefore it is treated as a mode of payment. In fact, gold is so important that in the event that paper money becomes obsolete, it might be the only mode of accepted payment!
Gold is considered to be one of the safest investment options existing in the market today. Individuals planning to invest in gold for the purpose of diversification to minimize the volatility of their portfolios should definitely do their homework on the IMF effect on gold prices. After all, the price of gold is not just affected by the demand and supply in the market but also by the policies of the IMF and other international organizations. Due to the fact that the IMF holds a huge volume of gold on Earth, it has the power to influence not just the current price of gold but also the movement of gold prices in the futures market in the long run.
Thus, before planning your investment strategy, it would do you good to learn more about the IMF effect on gold prices. First of all, you should understand that any decision taken by the International Monetary Fund will have a dampening effect on the prices of gold. Now, the fluctuation in gold prices would definitely affect the overall value of the gold in your possession. For decisive traders, this can result in a profitable trading opportunity. A temporary crash in the price of gold can increase one’s gold holdings while reducing the overall cost of acquisition by means of averaging. Thus, one will get better returns when there is an increase in supply in the market.
The bond between IMF and gold sales is definitely strong and this does not just affect individual investors but also gold mining companies. Although the gold sales made by the IMF may not be having a direct impact on the total amount of gold mined by these companies, but the perception of increase in gold supply can definitely impact the share prices of such companies.