Select Committee on Public Accounts Minutes of Evidence


Memorandum submitted by HM Treasury (PAC 00-01/44)

  I felt it would be useful, following last Tuesday's gold auction, to provide the Public Accounts Committee with updated auction information, prior to the hearing on Monday 5 February.

  I attach a copy of the Bank of England's press notice giving the result of the auction on 23 January. I have also set out in Appendix A updates of the information contained in figures 12, 13 and 14, and in paragraphs 2.13 to 2.16 of the Comptroller and Auditor General's Report.

SALES PROGRAMME FOR 2001-02

  As the Committee is aware the Treasury announced the UK's gold sales programme for the financial year 2000-01 on 3 March 2000. It is possible that we will follow this pattern again this year and announce the sales programme for the financial year 2001-02 in March prior to the next auction on Wednesday 14 March. This will facilitate the smooth operation and running of the March auction. However, before announcing our plans we will be reviewing the auction process and that will include consideration of the suggestions/recommendations in the Comptroller and Auditor General's Report.

Gus O'Donnell

HM Treasury

26 January 2001

Appendix A

UPDATED AUCTION INFORMATION:

Figure 12

  At the tenth auction on 23 January 2001, 805,600 ounces of gold were sold at $268.00 per ounce that generated revenue of $215.9 million or £147 million at the exchange rate at close on Tuesday 23 January*.

  Including the tenth auction, total revenue from the gold sales rose to $2,206 million or £1,500 million at the exchange rate at close on Tuesday 23 January*.

Figure 13
Price at 23 January 2001 auction: $268.00 per ounce
Proceeds from 23 January 2001 auction: $216 million
Bid cover ratio at 23 January 2001 auction: 4.8

Figure 14
Afternoon London Gold Fix on 23 January 2001 $266.10 per ounce
Variation between the afternoon London Gold Fix and the price at tenth auction 23 January 2001 $1.90 per ounce

Comparison of average auction price with average London Gold Fix price (paragraphs 2.13 to 2.16 of Report and figure 16)
(a)  Average auction price at ten auctions: $274.31
(b)  Difference between average auction price and the average London Gold Fix (pm) on day of each auction: 38 cents
(c)  Average London Gold Fix (pm) price over the period from the first auction (6 July 1999) to date of last auction (23 January 2001): $278.06
(d)  Difference between (c) and (a) above: -$3.75 (1.3 per cent)
(e)  Average London Gold Fix (pm) price over the 20 month period from 10 May 1999 to 9 January 2001: $277.25
(d)  Difference between (e) and (a) above: -$2.94 (1.1 per cent)

*$1.4709 = £1

Bank of England News Release

HM GOVERNMENT GOLD AUCTION RESULT: 23 JANUARY 2001

  The Bank of England announces that the gold on offer (approximately 25 tonnes or 803,600 ounces) has been allotted in full at a price of $268.00 per ounce. Details of the result are as follows:
Amount of gold on offer (approx)803,600 oz
Amount applied for3,852,400 oz
Times covered4.8 times
Amount allotted to bidders805,600 oz
Allotment price$268.00
Scaling factor at allotment price35.8035 per cent

  All accepted bids which were made at prices above the allotment price have been allotted in full at the allotment price. Valid bids made at the allotment price have been allotted an amount of gold equal to the amount bid for multiplied by the above scaling factor and rounded up to the nearest 400 ounces.

  By close of business in London today, applicants whose bids have been successful in whole or in part will be notified by the Bank of England of the exact weight of the gold bars allotted to them and the amount payable in respect of their purchase. Payment must be made in US dollars to the Bank of England's account at the Federal Reserve Bank of New York, no later than 12 noon New York time on 25 January 2001.

NOTES FOR EDITORS

  On 3 March 2000, HM Treasury announced that the Bank of England, on behalf of HM Treasury, is to sell approximately 150 tonnes of gold from the Exchange Equalisation Account in a programme of six auctions of around 25 tonnes each in the financial year 2000-01 on the terms and conditions set out in an Information Memorandum which was published on 3 March 2000. This is the fifth auction in the programme of six. Auctions were held on Tuesday 23 May, Wednesday 12 July, Tuesday 19 September and Tuesday 7 November 2000. The remaining auction in this programme will be held on Wednesday 14 March 2001.

Bank of England

23 January 2001


 
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