Gold and its discontents

Unloading: Auctions of reserves make monetary sense but depress prices and employment.

July 09, 1999

THROUGHOUT history, gold has been treasured -- and hoarded. Now, the world is trying to reduce gold's remaining role as currency -- a sensible course but one that may have to be slowed given the fragility of the global economy.

The sale Tuesday by the Bank of England of 25 tons provoked the failure of a shaky South African gold mine, idling 5,000 miners. Today, the International Monetary Fund meets on a plan to sell some of its gold to forgive debts of the world's poorest countries.

South Africa's government has led the charge to dissuade the IMF. Its allies include Republicans in the U.S. Congress representing Western mining states. The United States wields 17 percent of the vote at the IMF, despite the efforts of some politicians to decrease it, and can veto a measure requiring an 85-percent vote.

Gold is not dismissed from its currency role. An air of crisis surrounds these sales, instead, because the world price of $290 an ounce in early May fell to $257 yesterday.

The Bank of England and IMF sales are not wrong. But if gold sales cause the poverty they are meant to alleviate, they are too abrupt. A smoother, slower policy of sales is in order.

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