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7 May 1999
RESTRUCTURING UK RESERVE HOLDINGS
The Treasury today announced a restructuring of the UK's reserve holdings to achieve a better balance in the portfolio by increasing the proportion held in currency. This will involve a programme of auctions of gold from the Exchange Equalisation Account, which holds the UK's official reserves of foreign currency and gold, with the proceeds being invested instead in foreign currency assets and retained in the reserves.
The Treasury intends to sell 125 tonnes of gold, 3 per cent of the total reserves, during 1999-2000, with the Bank of England conducting five auctions on the Treasury's behalf. Auctions will be held every other month starting in July.
$6.5bn of the UK's reserves is held in gold (715 tonnes). Over the medium term the Treasury is planning to reduce its gold holdings to around 300 tonnes. Detailed plans for auctions in 2000-01 and later years will be announced nearer the time, but arrangements are likely to be similar to those announced today.
NOTES FOR EDITORS
1. The announcement of the intention to restructure the reserves was made in answer to a Parliamentary Question from Ivor Caplin (Hove).
2. The UK gross reserves total $37bn (valued at market prices), but its foreign currency liabilities amount to $22bn. The $6.5bn held in gold therefore makes up almost half of the unhedged or 'net' reserves.
3. UK sales of 125 tonnes compare to global annual mining output of over 2,500 tonnes (according to Gold Fields Mineral Services) and total world holding of gold of over 100,000 tonnes (according to the IMF) of which over half (around 60,000 tonnes) is held in private hands.
4. There are just over 32,150 troy ounces to each metric tonne of gold. 125 tonnes is therefore approximately four million ounces.
5. A separate Bank of England press release provides more detail of the management of the auction programme. Media enquiries should be addressed to Chris Bailey at the Bank press office on 020 7601 4411.
6. Other media enquiries should be addressed to Charles Keseru at the Treasury press office on 020 7270 5188.