The United Kingdom's Official Reserves of Foreign Currency and Gold
The Composition of the Reserves
Under the Exchange Equalisation Act, the EEA's funds may be invested in securities and assets denominated in the currency of any country; in gold; or in SDRs. Information on the composition of the reserves is published regularly, as described in the Published Information on the Reserves section.
Securities and Other Eligible Instruments
Consistent with the objectives of the asset allocation process described in the Asset Allocation and Risk section, the EEA's assets consist chiefly of securities issued by the national governments of the United States, euro area countries and Japan.
The EEA also invests in, or makes use of other instruments, including:
- Bonds issued by other national governments, supranational organisations and selected official sector agencies;
- Foreign currency spot, forward and swap transactions;
- Interest rate and currency swaps;
- Bond and interest rate futures;
- Forward rate agreements;
- Gold deposits, gold location swaps and gold
quality swaps * ; - SDRs; and
- Certificates of deposit and bank and corporate commercial paper.
Gold
In
May 1999, the Government announced a restructuring of the reserves
involving a programme of gold sales by auction to achieve a better
balance in the portfolio by increasing the proportion held in
currency. Auctions of gold were held approximately bi-monthly
between July 1999 and March 2002. Around 395 tonnes were sold
by this means; the EEA's holdings of gold at the start of the
programme had been approximately 715 tonnes. Following each auction,
the proceeds of the gold sales were invested in foreign currency
interest-bearing assets and retained in the reserves broadly in
the proportion 40% dollars, 40% euros and 20% yen. Further information
on the gold sales programme is contained in HMT's
Review of the Sale of Part of the UK Gold Reserves (November 2002)
.
The National
Audit Office
and the House
of Commons Public Accounts Committee have also produced reports
on the gold auction programme.
The EEA's holdings of gold are published each month on the Bank of England website **.
* Under a gold location swap, gold stored in a particular physical location is swapped with a market counterparty for a specified period with gold stored in another physical location. Under a gold quality swap, gold of a particular quality ("fineness") is swapped with a market counterparty for a specified period with gold of a different fineness. In each case a fee is built into the transaction.
** See www.bankofengland.co.uk/mfsd/reserves/Tempoutput.pdf
.
The amount of gold held, and its current value, are shown at the
Asset
Allocation and Risk section.
