OWN CORRESPONDENT and Reuters, Johannesburg | Tuesday 3.00pm
BIDDING for the 25 tons of gold sold by the Bank of England on Tuesday closed at 12.30pm South African time, with the offer five times oversubscribed at an allotment price of $261,20.
Britain sold 25 tons of its reserve gold in the first part of a move to slash holdings to 300 tons from 715 tons to achieve what it calls “a better balance in the [reserves] portfolio by increasing the proportion held in currency”.
Details of the sale are published on the Bank of England website (see below).
Finance Minister Trevor Manuel said earlier on Tuesday that depressed gold prices are threatening marginal mines.
“It’s not only South Africa, but we’ve seen pressure elsewhere, certainly on Ashanti in Ghana recently and some of the new developments in Tanzania may also be impacted upon. “Part of it is about long-term views on commodities. I think that we have to be realistic about some of it.”
Concern over the British government’s handling of the sale since the auction was announced on May 7 has sparked a fall in the gold price which has wiped $650 million from the value of the country’s gold reserves.
JSE gold shares slid at the start of trading on Tuesday, weighing on the commodity stock-laden bourse a few hours before Britain was due to auction 25 tons of its gold reserves. The gold index had lost more than a percent in value ahead of the Bank of England’s auction of the instalment, the first of five.
Although gold no longer holds the central position in the South African economy that it once did in the past, it remains the country’s biggest foreign exchange earner and one of its largest single employers.
Analysts said that although gold shares had already largely discounted the bullion sale, investors had adopted a wary stance until the event was out of the way. “The bottom line is that the Bank of the England’s sale of the first 25 tons is already discounted, it’s gone,” said Dave Hall, gold analyst at Merrill Lynch in Johannesburg.