There have been many questions as to how central banks will handle the helicopter money packages. With all reserves under pressure, selling precious metals is always an option. For the IMF, that is anything but the case, as it will not get rid of the gold reserves just yet.
Gold Reserves Shine Like a Beacon
It is evident that all financial institutions are under tremendous pressure lately. The COVID-19 pandemic has not made life easy, and things are gradually worsening across the globe. For the IMF, there are some tough decisions to be made. One option that was never on the table, however, is liquidating gold reserves for debt relief.
That debt relief would not affect the IMF itself. It is a measure that can be used to help out poorer nations who can’t make ends meet. At the same time, once such a package is offered to one country, everyone else will want their share of the pie too. Touching the gold reserves is never an option, or at least not for now.
In fact, the IMF confirms how gold reserves provide “fundamental strength”. A very bullish signal for the popular precious metal. It has to be said, the IMF’s own gold reserves have noted a healthy profit throughout 2020 so far. It is estimated that profit amounts to as much as $38 billion.
That amount can cancel out the debt of over 70 poorer countries in the next 15 months. Some people will opt to explore this option regardless, but it would be a band-aid on a gushing wound. This is not the time to introduce temporary measures. Instead, it is crucial to look toward the long term first and foremost.
Uncertainty Makes it Difficult to Make Decisions
Another factor influencing this decision is how there is plenty of economic uncertainty. This makes it impossible to find a working solution before things show any sign of normalcy. This validates the IMF’s decision to not sell its gold reserves, even if it met with a fair amount of criticism.
That being said, the IMF has approved emergency financing of over $10 billion to low-income countries. That may not be of much aid if the COVID-19 pandemic isn’t quelled quickly. One thing is certain: gold is an important component of the IMF’s balance sheet. There are no plans to sell the reserves right now, nor will there be in the future.
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