UK counts cost of Brown's gold sales

THE BILL for Chancellor Gordon Brown's decision to sell more than half of Britain's gold reserves has hit £250m as the bullion price rises. It closed at over $305 an ounce in London on Friday, its highest for two years.

The Chancellor has sold 375 tons of the metal - more than 12m ounces - at an average price at least $30 (£21) an ounce lower than this. Had he held on to the gold, it would be worth over £250m more today. That is before losses made on converting the proceeds into euros - previously reckoned at more than £50m.

Brown announced his plan in 1999 and the intention was to invest 40% of the proceeds in euros, 40% in dollars and 20% in yen. Dollar holdings have increased in value but the euro and yen have fallen sharply.

Neither Brown nor his officials can have foreseen the new interest in gold after Enron and other accounting related scandals. A UK fund manager said last week: 'Gold is nice and shiny and above all, it doesn't have to be audited'.

The Treasury and the Bank of England have scaled down the sale plan slightly. Initially 415 tons were to be sold of a total of 715 tons held in reserves. That has been reduced to 395 tons. All but 20 tons of this has been auctioned. The final auction is due on 5 March.

The best price raised at the auctions was $293.50 an ounce but some gold was sold as low as $255.75. Brown was criticised for depressing the price by announcing his sale plan in advance. Asked about the £250m loss, the Treasury said: 'Obviously there have been movements in the markets. This is about realigning the portfolio for the benefit of the long term.'