UK gold reserves fail to meet gold standard

“This is not about purity, this is about physical appearance,” Says a spokesman for the Bank of England. Mervyn King was not risking making the statement himself.

It has been discovered that some of the bars of gold held in the bank of England have been poorly made and have started to show cracks. The gold showing signs of deterioration was originally imported from America in the 1930s and 1940s falls below the proper LGD(London Goods Delivery) standard as specified by the London Bullion Market Association. The Bars are reported to have the proper assay markings added at the time of manufacture to assure the purity, however the paper work is unavailable.

Gold Ingots
Picture from Wikipedia article about Gold

The bank currently holds a reserve of 320 tonne on behalf of the treasury and they say this could temporarily reduce the value, the gold may have to be re-refined. The gold held by the Bank of England is an insurance policy in case of turmoil in the world’s money markets and the reserve is currently worth around £4 billion. However much of the reserves have been halved in recent years according to government policy lead by Gordon Brown to diversify the holdings.

Revelations about its physical deterioration were secured by the trade journal Metal Bulletin. It’s suggested that pure gold should not crack or exhibit fissures and that therefore the gold may not be 100% pure.

Peter Ryan, an analyst at the consultant Gold Field Mineral Services, said: “I would guess that it would only be a small proportion that doesn’t conform to standards and it would only be an issue if they needed to sell the gold. Some of this gold was acquired 30 or 40 years ago and standards do vary, but it is not difficult to fix.” The gold price has been soaring recently as investors seek a hedge against the falling dollar and inflation worries. Strong demand from India, the biggest gold-consuming country in the world, has also boosted prices. There, gold jewellery, ingots and coins are a favourite wedding and festival gift.

Quoted from Times online article covering this story; All that glisters may not be gold.

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