So here’s the deal: a few weeks ago, hedge funder and investor Eric Sprott started up a physical gold bullion ETF that trades under the ticker “PHYS.”
The ETF IPO’d on February 26th with 40 million shares outstanding and the trust has listed assets of 13,685 ounces of gold owned, according to Jesse’s Cafe Americain.
Meanwhile, in mid-February, the IMF decided to sell a ton of gold. Specifically, 403.3 metric tonnes of the stuff. It sold 200 tonnes to the Reserve Bank of India, 10 tonnes to the Central Bank of Sri Lanka, and 2 tonnes to the Bank of Mauritius, a total of 212 tonnes.
That left 191.3 metric tonnes left available for purchase to qualified buyers, which include central banks and sovereign nations. According to Kitco, Eric Sprott bid to buy the remaining 191.3 tonnes and the IMF refused to sell it. It caused a lot of commotion and got some people heated up about the matter. It was characterised as Sprott calling the IMF’s bluff.
So we called the IMF to get the full story. We spoke with Alistair Thomson, external relations officer at the IMF, who cleared up the matter for us. Here’s the breakdown of what he told us:
- 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.
- The IMF is also phasing out the gold sale and does not intend to dump it all at once because to do so would disrupt markets, which is obviously not their intention.
- 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.
And there you have it. It’s simply a matter of protocol and Mr. Sprott not adhering to it. For Sprott to buy up 191.3 metric tonnes, which is equal to 6,747,908.92 ounces, in US dollars at the current price of $1129.40 would cost him, well, a lot. More than anyone can afford. Perhaps he should go the route of buying through central banks. That or he could always hit the Yukon with a pan.
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