Britain shocks with plan to sell gold

Over three or four years, national gold reserves will be reduced by 415 tonnes to about 300 tonnes. The current 715-tonne stocks are worth 6.5 billion dollars, the government said. The Bank of England will sell the gold at auctions to be held every other month, starting on July 6.

A treasury spokesman said: “We are setting out for the market today where we want to end up and the pace we want to take it.” He said that the proceeds would remain in Britain’s official reserves in the form of currency. “This is all about the structure of the family silver, not selling it,” he said.

Britain is chasing “a better balance in the portfolio by increasing the proportion held in currency.”

The Treasury said the gold holdings would be replaced by foreign currency assets, split roughly 40 per cent in US Dollars, 40 percent in Euros, and 20 percent in Yen. A Treasury spokesman said that if Britain were to join the Euro, it would need to deposit around 140 tonnes of gold at the European Central Bank, less than half the level it intends to retain.

The Treasury said Britain’s gross reserves totalled $37 billion at market prices but its foreign currency liabilities amounted to $22 billion. The $6.5 billion held in gold therefore makes up around half of the unhedged, or net, reserves.

The programme of gold auctions will be made from the exchange equalisation account. Future auctions in 1999/2000 will be in September, November, January and March 2000.