Newspaper article The Christian Science Monitor

Gold Bars Retain Symbolic Value - as the IMF Learns Gold-for-Debt-Relief Proposal Draws Criticism

Newspaper article The Christian Science Monitor

Gold Bars Retain Symbolic Value - as the IMF Learns Gold-for-Debt-Relief Proposal Draws Criticism

Article excerpt

When the price of gold shot up to $417 an ounce earlier this year, some forecasters began searching for that nasty culprit - inflation.

They didn't find it. Although gold tends to hold its value during inflationary times, it seems this time investors were buying the glittery metal for the same reason they buy wheat or lead or any other run-of-the-mill commodity. Yet, things are never that simple when it comes to gold. It still holds powerful sway over the imagination.

"There is a degree of irrationality attached to whatever discussion there is on gold," says Michel Camdessus, managing director of the International Monetary Fund (IMF). "It is extremely difficult to have a purely rational, cold discussion, even in the coldest circle of financiers ... on utilizing gold." Mr. Camdessus should know. He backed a proposal last week at a meeting here of the IMF's policymaking committee that the fund sell a modest amount of its $40 billion in gold reserves- perhaps up to 5 percent - in order to make low-interest loans to a passel of developing nations who face such crushing debt that they can't hope to repay it under the current terms. None of the IMF's member nations seems to disagree with the idea of helping out. It's just that some of the fund's members, notably Germany, France, and Japan, are balking at the idea of selling gold reserves to do it. It would harm the fund's financial integrity, they argue. Governments have long held onto gold as a way to buttress their financial integrity. They hold about a third of the world's gold today. Private investors hold another third in the form of coins and bars. The final third decorates women and men as jewelry. The IMF accumulated its 103 million troy ounces in its early postwar years, when member nations were required to pay a quarter of their quota in gold. …

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