Archived World Gold Council Document

World Gold Council Criticises UK's Latest Gold Auction

The World Gold Council has condemned today's auction of 25 tonnes of UK gold reserves, staged by the Bank of England at the behest of the Treasury.

"The low price achieved by today's auction - just $255.75 per ounce - further demonstrates the foolishness of selling such an important national asset into a market now at its weakest point in the past two decades," said Gary Mead, Head of Research at the WGC. "The government received £2.83 million less than in the first sale in July and the impact of the two sales so far has cost the Treasury more than £540 million."*

Following the Treasury announcement of its intention to sell 415 tonnes of Britain's gold reserves on 7 May this year, the gold price slumped by more than $30 an ounce from the previous day's $287.95, reaching a new 20-year low point. This has been enormously damaging not just to the UK's gold reserves - which have been devalued by more than £500 million as a result - but also to many of the world's developing countries who are important gold producers.

Today's auction price is even poorer in comparison with that achieved at the first auction on 6 July, when the price for the 25 tonnes then sold was $261.20 an ounce. The UK government plans to hold another three auctions between now and the end of the current fiscal year, April 2000.

"While the sale of another 25 tonnes is of little consequence in volume terms, given that global demand for gold is extremely robust, exceeding new mine supply by 1,000 tonnes in 1998, this auction has dealt another psychological blow to a global industry where confidence is already very fragile," said Gary Mead.

The WGC believes that the government should pay heed to the growing army of opponents to the gold auctions. The ranks of those ordinary citizens who are vigorously contesting the wisdom of selling one of the UK's strongest reserve assets are growing daily. Following the last auction almost 50,000 people - from all walks of life - registered their disapproval. The latest stage of the WGC's "Hold Onto Our Gold" campaign, designed to dissuade the Treasury from this action, has already accumulated another 10,000 supporters, and it is anticipated many more will join before this week is out.

Mr Mead expressed surprise that the UK Treasury was pressing ahead with its sales when the International Monetary Fund is, apparently, poised to abandon its own plans to sell gold onto the open market. The IMF seems to recognise that the sale of as much as 311 tonnes of its gold would have a deleterious impact on the gold producing nations of the developing world.

"By halting these auctions now, Mr Gordon Brown, the Chancellor of the Exchequer, could send a signal to the international gold market, which would undoubtedly help boost the future gold-related export earnings of many of the world's poorest countries. He would also win the admiration and approval of the tens of thousands of ordinary British voters who are now anxiously watching their country's gold reserves dwindle both in size and value," said Mr Mead.

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Contacts:

London
Gary Mead, World Gold Council 0171 930 5171/ 0189 549 525
Keith Irons, Bankside Consultants 0171 220 7477 / 0585 356 639

New York
George Milling-Stanley, World Gold Council 001 212 317 3800
Victor Webb, Marston Webb International 001 212 684 6601

Note to Editors:

When the first UK gold sale took place on July 21 the World Gold Council (WGC) arranged for a barge containing 'golden' scrap metal to be towed along the River Thames to the Houses of Parliament, with the slogan "Gordon Brown & Co, scrap metal merchants" along the sides.

The WGC continued this theme today with a horse-drawn 'rag and bone' cart, complete with 'golden' scrap metal which travelled around Parliament Square and along Whitehall to deliver copies of a 60,000 name petition from the "Hold On to Our Gold" campaign to 10 Downing Street for the Prime Minister and Chancellor Gordon Brown, and to the House of Commons for Mr Giles Radice MP, chairman of the House of Commons' Treasury Select Committee, and Sir Michael Spicer MP, chairman of the Treasury Sub-Committee of the Select Committee.