EUROPE’S CENTRAL banks are $40 billion (€30 billion) poorer than they might have been after they followed a British move taken 10 years ago today to shrink the Bank of England’s gold reserves, analysis has shown.
London’s announcement on May 7th, 1999, that it would sell a large share of the bank’s gold reserves in favour of assets offering a return, such as government bonds, was the high water mark of so-called “anti-gold” sentiment among European central banks.
Many of these banks, such as those in France, Spain, the Netherlands and Portugal, decided later in 1999 to follow Britain and sell off their reserves. At that time, gold was worth about $280 an ounce, less than one-third of its current level of more than $900.
European banks eventually sold about 3,800 tonnes of gold, reaping about $56 billion, according to calculations from official sales data and bullion prices.
Taking into account the likely returns from the investments in bonds, the banks have gained another $12 billion. But because today’s gold prices are far higher, they are about $40 billion poorer than if they had kept their reserves.
The biggest loser is the Swiss National Bank which sold 1,550 tonnes over the decade and, at today’s gold prices, is $19 billion poorer. It is followed by the Bank of England, which is $5 billion poorer.
The UK treasury yesterday defended its decision to sell gold as a way to diversify reserves and cut risk. The Swiss National Bank said that it did not plan to sell more gold.
