UK to Sell Off Over Half of Its Official Gold Reserves

The UK government's plan to sell off more than half of its 715-tonne gold stock, which has been stored in the vaults of the Bank of England, will significantly reduce the country's official gold reserves. Over the next few years, the UK's gold reserves will be reduced to around 300 tonnes, with the first sale of 125 tonnes scheduled to take place by March 2000. This announcement signals a further decline in the status of gold as an official reserve, following the collapse of the post-war Bretton Woods Agreement in 1971. The move has sparked concerns among policymakers and critics, who argue that gold is no longer a useful asset for central banks.

Key Takeaways:

• The UK's gold reserves will be reduced from 715 tonnes to around 300 tonnes over the next few years.
• The first sale of 125 tonnes is scheduled to take place by March 2000.
• The UK is not the first country to sell off a significant portion of its gold reserves, with countries like Canada, Belgium, the Netherlands, Argentina, and Australia having recently held sales.
• The move reflects a shift in the way policymakers use central bank reserves, with gold no longer deemed a "reserve worth holding".
• Central banks can make a modest income by lending gold for fixed periods on the spot market, providing a return of around 2% of the asset's value.
• The sale will see gold's share in the government's net reserves fall from about half of £15bn to around one-fifth.
• The UK's decision follows a similar move by Switzerland, which has ended its currency's link to gold and sold off part of its large gold reserves.
• The US has no plans to sell its $11bn in gold reserves, but the intellectual climate has shifted towards selling gold from public to private ownership.

Statistics:

• The UK's gold reserves will be reduced from 715 tonnes to around 300 tonnes over the next few years.
• The first sale of 125 tonnes is scheduled to take place by March 2000.
• Gold's share in the government's net reserves will fall from about half of £15bn to around one-fifth.
• The price of gold has declined from about $500 an ounce in the late 1980s to below $300.
• Central banks can make a modest income on the precious metal by lending it for fixed periods on the spot market, providing a return of around 2% of the asset's value.

Sources:

• "Chancellor plans to sell gold", Financial Times Limited, 1999.
• "UK to sell gold reserves", BBC News, 1999.
• World Gold Council, "Gold in Central Banks", 1999.
• International Monetary Fund, "Gold Reserves and Holdings", 1999.