- UK less able to withstand economic shocks
Gold auctions further weaken UK reserve position
LONDON: Tuesday, 25 January 2000 - Britain will be less able to withstand
the effects of international economic shocks following the sale today
of a further 25 tonnes of its gold reserves at a price of $289.50, said
the World Gold Council.
The series of auctions - today's auction is the fourth in a series of
five - has reduced the UK's gold reserves by 100 tonnes since July and
achieved little but a further weakening of the country's overall reserve
position, said the Council.
"This still seems to us to be an incredibly foolhardy action, based upon
a complacent assumption that the 'good times' will stay indefinitely,"
said Miss Haruko Fukuda, chief executive of the World Gold Council. "On
the face of it the UK's economy is sound, and growing without strong inflationary
pressures, and it is easy to forget the problems of the past."
She said that the world had seen only recently in several countries,
such as Taiwan, Indonesia and Korea - the 'Tiger' economies of the Far
East - how economic fortunes can quickly change and the US, Britain and
Europe are not immune to such problems.
"Prudence dictates that in an uncertain world the UK should hold a significant
proportion of its reserves in an asset which is not in thrall to the vagaries
of economic policy-making in Brussels or politics in the United States,"
said Miss Fukuda. "Only gold possesses that unique authority - it is the
only monetary asset which is not someone else's liability. Our national
gold reserves are the one pillar of economic strength that lie beyond
the capricious whims of politicians and bureaucrats."
After the next sale in March a total of 125 tonnes will have been auctioned
and the proportion in the UK's total reserves held in gold will be down
to about 15% - the same level as that currently held by the European Central
Bank.
"At that level we believe it is time to call a stop to these sales,"
said Miss Fukuda. Even at that point the UK will have significantly less
gold than many of the major G8 countries and several of its European Union
partners. The European Central Bank has committed itself to holding 15
per cent of its gross reserves in gold. Countries of comparable economic
importance in the EU, such as France, Germany and Italy, have gold reserves
far greater than those of the UK, and have said they will continue to
maintain them at those levels.
"If the UK Treasury continues with its plan to sell a total of 415 tonnes
the UK will be reduced to having just 7 per cent of its gross reserves
in gold and in a global economic context such a sale unwisely yields a
hostage to fortune.
"The government appears to have forgotten that in times of economic uncertainty,
both during inflation and recession, gold provides the lodestar of dependability.
Instead of selling, the government should be taking advantage of the relatively
low historic price of gold to build up the country's gold reserves to
a level in line with some of our EU partners," added Miss Fukuda.
End
Contacts: Haruko Fukuda, chief executive, WGC 0171 930 5171
Robert Pringle, Centre for Public Policy Studies, WGC 0171 930 5171
Keith Irons, Bankside Consultants 0171 220 7477
E-mail: mail@bankside.com]
UK gold holdings compared to other G10 countries
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Gold % share in total reserve holdings
# |
Gold Tonnes |
Forex ($m) |
Gold at $287.2 an ounce, $m |
Total, $m |
| USA |
55.2 |
8,170 |
61,276 |
75,440 |
136,716 |
| Italy |
51.7 |
2,452 |
21,181 |
22,640 |
43,821 |
| Netherlands* |
47.6 |
971 |
9,873 |
8,966 |
18,839 |
| France |
42.3 |
3,024 |
38,123 |
27,923 |
66,046 |
| Switzerland* |
40.8 |
2,590 |
34,635 |
23,917 |
58,552 |
| Germany |
35.3 |
3,469 |
58,747 |
32,028 |
90,775 |
| Netherlands** |
34.7 |
712 |
12,366 |
6,574 |
18,941 |
| EU, total |
28.7 |
12,768 |
292,598 |
117,897 |
410,495 |
| Switzerland** |
25.6 |
1,290 |
34,635 |
11,912 |
46,547 |
| Belgium |
18.0 |
258 |
10,889 |
2,383 |
13,272 |
| UK* |
16.1 |
615 |
29,618 |
5,679 |
35,297 |
| Sweden |
10.1 |
185 |
15,257 |
1,712 |
16,969 |
| UK** |
7.8 |
300 |
32,527 |
2,770 |
35,298 |
| Japan |
2.5 |
754 |
270,797 |
6,962 |
277,759 |
| Canada |
1.8 |
56 |
28,371 |
518 |
28,889 |
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| * Position following the UK sale on January 25, 2000 |
** Position following the completion of all announced
sales |
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| # With gold valued at $287.20 (London pm fix on 24/1/00)
and latest available data for foreign exchange reserves. |
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