| LONDON: Monday, 29 November
1999
Gold auctions weaken UK reserves
- Today's third auction - of 25 tonnes - of the UK's gold reserves has
achieved little but a further weakening of the country's overall reserve
position, said the World Gold Council.
"At a time when the euro is at an all-time low and there is concern
about credit expansion in the US, there is need to consider augmenting,
not diminishing, the country's gold stocks. Our national gold reserves
are the one pillar of economic strength that lie beyond the vagaries of
global paper currencies," said Miss Haruko Fukuda, chief executive
of the World Gold Council.
The auction has taken place during a particularly troubling time, when
there are signs of a serious possibility of a resurgence of global inflation.
The price of crude oil has more than doubled in the past 12 months, and
recently exceeded $27 a barrel for the first time since 1991. The US economy
is now growing at a staggering rate; US gross domestic product rose by
an annualised 5.5 per cent in the third quarter of 1999, and the current
quarter is likely to show similar growth.
In this global economic context the sale of 415 tonnes of the UK's total
of 715 tonnes of gold reserves 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.
The European Central Bank has committed itself to holding 15 per cent
of its gross reserves in gold; by the end of the auction process the UK
will be reduced to having just 7 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.
"The UK Treasury very sensibly argues that its key intention is
to exercise caution in the management of the British economy. However,
its policy of gold auctions appears to me to be guilty of worrying short-term
thinking. If the present rosy economic horizon should darken, it will
be British taxpayers and voters - all of us - who will suffer the consequences
of this action," said Miss Fukuda.
Contacts:
Miss Haruko Fukuda: chief executive, WGC, 0171 930 5171
Gary Mead: head of research, WGC, 0171 930 5171
Keith Irons: chairman, Bankside Consultants,
0171 220 7477 / 0585 356 639
[Issued by Bankside Consultants, London on behalf of the World Gold
Council. Tel: 0171 220 7477 Fax: 0171 220 7211
E-mail: mail@bankside.com]
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