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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.

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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.

"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."

Sir John Bourn


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