Press Release - The Sale of Part of the UK Gold
Reserves
12 January 2001
Sir John Bourn, head of the National Audit Office, reported to
Parliament today that the Treasury had successfully met its
objective to sell part of the UK's gold reserves in a transparent
and fair manner while achieving value for money. He also said that
the Treasury's agents, the Bank of England, had kept the gold
market well informed and the gold sales programme had been well
run.
In May 1999 the Government announced that it would sell around
415 tonnes of UK gold reserves over the medium term. The overall
aim is to restructure the UK's reserve holdings to achieve a better
balance in the portfolio by increasing the proportion held in
currency. By the date of publication of the report the Treasury had
sold 225 tonnes of gold in nine auctions, generating revenues of
$1,990 million (£1,357 million*). The next auction will take
place on Tuesday 23 January 2001.
The National Audit Office found that the prices achieved at the
nine auctions had been competitive and in line with the best
available price benchmark - the London Gold Fix** price. They also
found that the decision to sell gold through a series of auctions
met the policy criteria well, providing a very transparent and fair
sales mechanism.
The London Gold Fix is the next best method for selling gold. It
is less transparent in that total amounts sold are not disclosed
but it offers the opportunity to vary the volume and timing of the
gold to be sold on a daily basis. There is support in the London
gold market for using the Gold Fix. The National Audit Office
consider that the Treasury could give further thought, in
consultation with the gold market, to using the London Gold Fix as
an alternative or additional means of selling gold.
Sir John Bourn said today:
"In designing and implementing the gold sales programme
so far the Treasury has done well. In its further review of the
programme the Treasury should consider whether there are
opportunities to strengthen the handling of the sales
further."
Notes for Editors
* Proceeds from the auctions were received in US$. The £
equivalent is based on the US$1.467/£ exchange rate prevailing on
18 December 2000 when this report was finalised.
** The London Gold Fix is a long-established system that enables
buyers and sellers of gold around the world to trade twice daily
with one another, via the five direct members of the Fix.
HM Treasury has overall responsibility for the UK reserve assets
and the Bank of England acts as its agent to manage the
reserves.
On 7 May 1999, HM Treasury announced a restructuring of the UK's
official reserves which involves a programme of gold auctions. The
announcement stated, that, on behalf of HM Treasury, the Bank of
England is to sell approximately 125 tonnes of gold in a programme
of five auctions of around 25 tonnes each in the financial year
1999-2000 on the terms and conditions set out in an Information
Memorandum which was published on 11 June 1999. Plans for auctions
in 2000-01 were announced on 3 March 2000.
The objective for the gold sale programme is to sell around 415
tonnes of gold in a transparent manner, over the medium term,
fairly and with a view to obtaining value for money for the
taxpayer.
Press notices and reports are available from the date of
publication on the NAO website at http://www.nao.org.uk/ Hard
copies can be obtained from The Stationery Office on 0845 702
3474.
The Comptroller and Auditor General, Sir John Bourn, is the head
of the National Audit Office employing some 750 staff. He and the
NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 04/01
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