Britain rules out further gold sales for next five years

Britain said it has no plans to sell any of its gold reserves over the next five years, as the rest of Europe yesterday outlined intentions for fresh sales.

The European Central Bank and 14 national banks unveiled a new deal to limit their gold sales to 500 tons a year until 2009, up to a total of 2,500 tons worth $35.3bn at yesterday's price of $400 an ounce.

They said a "concerted programme" of sales would begin after 27 September when the current five-year deal expires. "Gold will remain an important element of global monetary reserves," they said.

Although yesterday's deal had been widely expected it strikes a further blow to the precious metal's role as a tool in global monetary policy. The deal marks an increase from the 2,000-ton limit set by 15 banks, including the Bank of England, in 1999, and the gold spot price fell as the markets reacted to the increased sales.

Market players welcomed the announcement but were disappointed there were no details on how much individual banks had agreed to sell.

Simon Weeks, the chairman of the London Bullion Market Association, said: "I would like to see the names sooner rather than later. If people come back from their summer holidays still not knowing, it would indicate the discussions are more difficult than thought."

In London the Treasury said it had not joined this agreement, as it had no plans to sell any more bullion in the coming five years.

The UK sold 395 tons of gold in 17 auctions, raising $3.5bn - £1.9bn at current exchange rates - which it invested in interest-bearing foreign currency assets. The three-year programme reduced its gold holdings to 20 per cent of its reserves from 50 per cent.

The agreement was announced on the sidelines of the Group of 10 meeting of central bankers from top industrialised nations and emerging markets. The G10, which includes Britain, said the global economic recovery was "strengthening".

Jean-Claude Trichet, president of the European Central Bank who chaired the meeting, said: "We have a strong recovery. The sense of the meeting today was that the sustainability of the recovery at the global level was certainly not to be put in question."