Getting ready for GATA''s next expedition to Washington

By Faisal Islam, Economics Correspondent
The Observer, London
Sunday, February 10, 2002
a href=http://www.observer.co.ukhttp://www.observer.co.uk/a

The surge in the price of gold could leave the
Treasury's two year sell-off of its reserves, which
ends next month, nursing a loss of hundreds of
millions of pounds. The sell-off caused a storm
of public protest when it began in 1999.

At the current gold price of $305 an ounce, the
value of the 375 tonnes of gold auctioned by the
Bank of England on behalf of the Treasury over the
past two years is $3.7 billion (2.6bn). According to
Bank of England records and a recent House of
Commons Public Accounts Committee report, the
Treasury received just 2.25bn in 16 auctions
between July 1999 and last month. The total
Treasury quot;lossquot; compared with the situation if the
Treasury had kept the gold would be around 350
million at current levels.

The quot;lossquot; does not take into account proceeds
from the purchases of dollars, euros and yen
funded by the sell-off. Gold has surged in value
in recent weeks as investors seek a safe haven
from worries about the world economy and
accounting standards in corporate America.

Japanese consumers have also been flocking to
banks to convert the rapidly depreciating yen into
gold bars. There are fears that the banking system
could collapse when government deposit guarantees
lapse in March.

The World Gold Council is compiling a report on
the effects of the UK auctions. An existing WGC
analysis shows that gold makes up just 7.4 percent
of British foreign exchange reserves. In the United
States it is 55.6 percent, in France 45.8 percent,
and Germany 36.8 percent. In absolute terms the UK
now has smaller gold reserves than Venezuela,
India, and Taiwan.