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House of Commons sounds like GATA, Part 1

Section: Daily Dispatches

Part 3, House of Commons sounds like GATA

We will have a better diversified portfolio. We will
not be as concentrated in gold as in the past. At the
moment, we are twice as exposed to movements in the
gold price as to movements in the value of the dollar.
Therefore, it is a simple portfolio decision, designed
to reduce the risk borne by the British taxpayer.

The hon. Members for Louth and Horncastle and for
Grantham and Stamford raised the question, as did other
hon. Members, of the timing. The decision to sell now
was not motivated by any view that the gold price was
about to fall further, or by any of the wilder
fantasies that have been suggested. The decision
follows a careful review of the role for gold in the
UK's reserves. As I have said, it is about portfolio
restructuring, not about playing the market, which the
hon. Member for Grantham and Stamford seems to want us
to do.

Of course we considered various routes for selling the
gold before we decided that an auction programme
offered advantages of transparency, spreading sales out
over a lengthy period. If we had sold outside an
auction process, we risked uncertainty over the timing
of sales and much greater undermining of the gold
price. If we had gone for covert sales on that scale,
it is extremely likely that the sales would have been
possible only at a discount to the market price. The
House would rightly have been critical of such a

The gold market has become increasingly sensitised to
central bank sales in recent years, of which, as some
hon. Members have reminded us, there have been many
throughout the world. There would have been a real
danger that the market would have realised that a major
central bank was selling and would have over-reacted to
the volumes actually sold. As the Governor of the Bank
of England has indicated, even with the orderly and
transparent procedure that we have adopted, the market
reaction has been somewhat overdone.


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