Right of Reply: Haruko Fukuda

RECENT WEEKS have seen much argument over the UK Government's decision to sell more than half of the country's gold stocks. Your editorial of 6 July introduced an interesting new twist in arguing that the substitution of paper money for gold is an example of democratisation. I disagree.

Gold is independent of government; throughout history it has been the store of value trusted - and used - by everyone. Paper currency, ultimately, is only as good as the government that issues it. Today gold is still bought in quantity by millions in Asia and the Middle East and used as a store of value. Their faith was justified during the Asian crisis. Gold, as Alan Greenspan said recently, "still represents the ultimate form of payment in the world. Fiat money in extremis is accepted by nobody."

Market research in Europe and the US confirms that the majority of people like gold and believe in it. It is governments that dislike gold, as they cannot control it, and governments that, in recent times, have sought to limit, and even forbid, people's access to it.

Gold is the asset of last resort. In good times, when confidence in economic management is high - as it is at the moment in most Western industrialised countries - confidence in paper money is also high. Gold seems less valuable and the basic reasons why it should be a part of anyone's portfolio are overshadowed by economic optimism. When times are bad and confidence in paper currency slips - as in the Seventies - gold comes into its own. It is tempting to believe that good times last for ever but they do not. That is why I believe the UK Government is wrong to sell gold and why a mere five countries - hardly a bandwagon - have sold significant quantities of gold during the last decade.