Vancouver — Following the Bank of England’s sale of 643,200 oz. gold, the price of the precious metal has drifted lower.
Despite the fact that the sale was over-subscribed by 3.7 times as bidders applied for 2.4 million oz. at US$268 per oz., the price of gold in June dropped US$1.20 to US$267.50 per oz.
The British treasury began selling off a big chunk of its gold reserves last year. In all, it is selling 415 tonnes gold of the 715 tonnes it possesses. This is about 10% of its total financial holdings.
“Our aim is to optimise and diversify our portfolio with a sensible risk return balance,” says a treasury spokesman.
On March 7, the Bank of England announced plans to sell approximately 120 tonnes gold in six auctions in the financial year 2001-02. The latest 20-tonne auction was the first. The next is planned for July 11.
The U.K. is using the proceeds to buy more foreign currencies.
Gold has been generating relatively poor returns for central banks and several countries have been selling off their reserves, including Australia, Belgium, Holland and even Switzerland.
Over the last 20 years, bonds and shares have given better returns than gold, propelling many banks to replace the yellow metal with better-yielding investments.
The European Central Bank has decided to hold only 15% of its reserves in gold. This is well below the 30% average of most of the countries in Europe.
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