Gold regains its glitter as prices surge in world markets

THE PRICE of gold soared yesterday after Europe's central banks said they had agreed to halt further official sales. The agreement demonstrates Gordon Brown's Midas touch.

Gold leapt $12 an ounce as soon as the markets opened, and was $17 higher at $281 at London's afternoon fix. It was the biggest one-day rise for a decade and a half. The announcement took the market completely by surprise.

Gold shares surged across the world. In London, Anglo- American was the highest riser on the FTSE 100, closing up 304p or 9.4 per cent at pounds 35.31. In South Africa, where up to 100,000 were said to be at risk from the falling gold price, the Gold Index rose 145.1 points or 14.03 per cent to 1,179.2, its highest since October 1998.

It marks a notable victory for the Chancellor as the planned UK auction of 415 tonnes from total gold reserves of 715 tonnes will go ahead, but now at a higher market price. Treasury officials did not try to hide their satisfaction that the controversial decision has turned out so spectacularly well.

Sunday's announcement took the markets by surprise. Andy Smith, an analyst at Mitsui Commodities, said: "The logic was pointing to central banks continuing with these sales, and a co-operative solution didn't seem to be on the cards at all."

The price has dived since the Treasury stunned the market with its decision in May to auction part of the UK gold reserves. The new agreement came about because of alarm over gold market conditions in the wake of the UK announcement.

Eddie George, Governor of the Bank of England, played a leading role in putting together the new deal during August as chairman of the "Group of 10" central banks. It was finalised earlier this month at a meeting of European finance ministers in Finland.

The scale of the market reaction to the UK's auctions surprised the Treasury. However, officials said there had been no pressure on the Government to abandon the remaining auctions. The first 50 tonnes have been sold, with the second auction achieving a price of $255.70 per ounce.

If the price remains at or above yesterday's level, the moratorium on gold sales will boost the Treasury's takings from the remaining auctions over the next three years or so. Officials in Washington indicated they were delighted the UK auctions had "got in under the wire". The higher market price will also boost the amount the International Monetary Fund can raise from its off-market scheme to revalue up to 14 million ounces of its gold reserves. It had assumed a market price of $260.

The central banks involved in the deal not to sell or lease their gold reserves for the next five years include the Bundesbank, Banque de France and Swiss National Bank as well as the Bank of England.The statement implied one bank has already planned but not announced the sale of just under 300 tonnes.

The US and the IMF have already ruled out open market sales of gold, so the great bulk of world official reserves willstay in the vaults until at least the end of 2004. But the sales already announced by the UK and Switzerland will go ahead.

Start your day with The Independent, sign up for daily news emails
Sport
Seth Rollins cashes in his Money in the Bank contract to win the WWE World Heavyweight Championship
WWERollins wins the WWE World Heavyweight title in one of the greatest WrestleMania's ever seen
News
news
Arts and Entertainment
Jay Z has placed a bet on streaming being the future for music and videos
music
News
i100
Arts and Entertainment
tvPoldark, TV review
News
(David Sandison)
newsHow living on a houseboat meant I didn't officially 'exist'
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor