G7 approves IMF gold sales - Italy econ minister

Italy's Economy Minister Tommaso Padoa-Schioppa speaks at a news conference at the IMF headquarters in Washington in this October 20, 2007 file photo.

TOKYO (Reuters) - The Group of Seven rich nations on Saturday approved the sale of gold by the International Monetary Fund from April as part of a broad reform of its budget, Italian Economy Minister Tommaso Padoa-Schioppa said.

"There was an acceptance among the G7 that resources should be raised by selling gold," Padoa-Schioppa, who is also the head of the IMF's steering committee (IMFC), told reporters after a meeting of G7 finance ministers in Tokyo.

He said the agreement would be finalised in April and would complement spending cuts being drawn up by the IMF under its new managing director, Dominique Strauss-Kahn.

"The current gold price means a flow of income can be ensured," Padoa-Schioppa said.

Morgan Stanley analyst Stephen Jen said the Fund held 103.4 million ounces of gold worth some $92 billion at current market prices. That was up from $23 billion just five years ago.

"The IMF is rich, if it wants to be," he wrote in a recent note to clients, issued before the G7's approval of the gold sales. "This is arguably a good time to consider selling some of these gold holdings and investing the proceeds in financial securities with positive yields."

A surge in oil prices has boosted gold's appeal as a hedge against inflation.

The precious metal gained more than 30 percent in 2007 as safe-haven buying increased due to the credit market turmoil and worries about the health of the dollar as it fell to record lows against the euro.

Gold continued its upward march this year. Cash gold hit a record high of $936.50 an ounce on Feb. 1, up about 12 percent since the start of the year, and was quoted at $918.00/918.70 an ounce in late New York on Friday.

Padoa-Schioppa noted that in the case of the United States, approval for gold sales would be required by Congress, meaning "the administration must present a proposal and support it".

Padoa-Schioppa said he would step down as president of the IMFC because of the recent fall of the Italian government which meant he would soon lose his job as economy minister.

Asked if he would continue as IMFC head, he said: "I don't believe so, it has to be a minister in office, and soon I will no longer be a minister in office."

(Additional reporting by Chikafumi Hodo and Emily Kaiser)