- Press Release by the WGC in London
UK GOLD SALES BACKFIRE
LONDON: 6 July 1999 - The sale today of the first tranche of 25 tonnes
of UK gold was a disaster for the gold market with the price falling to
a new low, and for gold producing countries and for Britain, said the
World Gold Council.
The result of the first auction by the Bank of England was worse than
many feared, said the WGC. The price of $261.20 accepted by the Government
was significantly below yesterday's market price and more than $26 below
the price on 6 May, the day before the Government announced the disposal
of 415 tonnes from its reserve of 715 tonnes, through a series of bi-monthly
sales.
"At this price the people of Britain are being 'short-changed'
by the Chancellor by a staggering £450 million ($600 million), "
said Miss Haruko Fukuda, Chief Executive of the WGC.
"This is the economics of the madhouse. We are told that these
sales are simply a restructuring of the portfolio so the government can
invest the proceeds in other interest-earning assets.
"Any interest earned over the next two years will be dwarfed
by the scale of the losses already incurred on the value of gold in the
reserves," said Miss Fukuda. "It will take 3.5 years at current
dollar bond rates of 5% to recoup this loss."
Gold producing countries, especially the Heavily Indebted Poor Countries
(HIPC) will also be significant losers from today's event, said the WGC.
They will suffer from a declining gold price, with a potentially disastrous
economic impact from falling export revenues and large scale job losses
in their developing mining sectors.
The gold market as a whole could also bear the pain in the longer
term through potentially declining activity and the consequential effect
on employment in producer nations.
"The Chancellor and the Bank of England seem to have lost sight
of the reason for having gold reserves in the first place - they are the
bastion of a nation's currency - to be used in the last resort when paper
money becomes unacceptable," said Miss Fukuda. "Gold is no one's
liability and retains its value when all else fails.
"Mr Brown has forgotten history and should learn from other countries
who recognise the importance of retaining significant gold reserves as
a crucial defence of economic and political autonomy.
The WGC said that it will continue to argue its case against a continuation
of these gold sales.
- ends -
Contacts:
Miss Haruko Fukuda, Chief Executive
Gary Mead, Head of Research
See also the advertisement "Hold on to
our Gold"
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