UK gold sale 'successful'

Britain will eventually sell 415 tonnes of gold

The sale of around 60% of UK gold reserves has been successful and achieved good value so far, the government spending watchdog has found.

It was May 1999 when the Treasury announced it was selling 415 tonnes of gold and using the proceeds to buy foreign currency.

Tories criticised the move as a plan to take Britain into the European single currency by stealth.

The Treasury has met successfully its objective to sell in a transparent and fair manner while achieving value for money

NAO report

In nine auctions so far 225 tonnes have been sold raising £1.357bn.

A National Audit Office (NAO) report published on Friday said the prices achieved had been competitive and the mechanism for selling the gold had been fair.

Comptroller and Auditor General Sir John Bourn said: "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 stressed that the NAO had not looked into the merits of selling the gold, only the way it was done.

Price decline

At the time the sale was announced, the Treasury said its aim was to balance the portfolio of Britain's reserves by increasing the amount held in currency against a background of falling gold prices.

They have declined from $850 (about £580) an ounce in 1980 to around $270 (about £185) now.

Some 40% of the proceeds has been invested in euros, 40% in US dollars and 20% in Japanese yen.

The NAO has also urged the Treasury to establish a mid-point review of the sell-off programme.

It recommended considering selling the gold via the London Gold Fix, a system which enables twice-daily global trading of gold.

Flexibility suggested

It also suggested the Treasury consider a more flexible approach to the timing of auctions - which have so far taken place on a regular and predictable two-monthly basis - in order to take advantage of fluctuations in the gold price.

The report concluded: "In designing and implementing the sales programme so far, the Treasury has met successfully its objective to sell in a transparent and fair manner while achieving value for money.

"The prices achieved at each of the nine auctions have been competitive and well in line with the prices achieved in similar gold sales by overseas central banks.

"The Treasury's agent, the Bank of England, has worked hard to keep the gold market well informed and to secure a technically successful sales programme that has been applauded by almost all of the gold market participants."