MOVE AWAY FROM GOLD HAS COST EUROPE'S CENTRAL BANKS $40BN

Europe's central banks are $40bn 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 by the Financial Times has shown.

London's announcement on May 7 1999 to sell a large share of the Bank's gold reserves in favour of assets that offered 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 around $280 an ounce, less than a third of its current level of more than $900.

European banks eventually sold about 3,800 tonnes of gold, reaping about $56bn, according to calculations from official selling data and bullion prices.

Taking into account the likely returns from the investments in bonds, the banks have gained another $12bn. But because today's gold prices are far higher, they are about $40bn 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 $19bn poorer, followed by the Bank of England, which is $5bn poorer.