By Paul Garvey
The Australian, Sydney
Saturday, July 29, 2017
In a vault deep in the basement of the Reserve Bank's Martin Place headquarters in Sydney sits a hoard of gold bars worth about $US500,000 each — all four of them.
The Reserve Bank of Australia now holds almost the entirety of the nation's gold in vaults administered by the Bank of England.
To add insult to injury to the nation's gold devotees, the vaults are stuffed full of the redesigned $10 polymer banknotes awaiting official release in September.
Holding physical gold was once a given for central banks as a means of protecting against inflation. Australia was among the first to question that orthodoxy when then-treasurer Peter Costello agreed to sell most of its holdings in 1997.
The decision prompted cries of betrayal from the gold industry and, with the benefit of hindsight, was incredibly poorly timed. Since the sale of 167 tonnes of gold for A$2.4 billion, or just over $400 an ounce, gold in Australian terms has rallied to record highs. The price peaked last July at A$1,819.44 an ounce, at which point the gold Australia sold for A$2.4 billion would have been worth A$10.7 billion.
The RBA's current gold holdings, in the Bank of England's vaults, now total just under 80 tonnes.
That's less gold than is held by the central banks of Iraq, Poland, and Romania, according to figures compiled by the World Gold Council, and is just a sliver of the amount held by similarly sized economies such as Spain (281.6 tonnes) and Russia (1706.8 tonnes). A standard gold bar is 400 troy ounces (12.4 kilograms), although there are also kilobars.
There is no suggestion by The Weekend Australian that the Reserve Bank is selling down its remaining holdings. Sean Russo, the founder and managing director of corporate risk management and hedging firm Noah's Rule, said while many viewed gold as "anachronistic," its extended record suggested otherwise.
"If you look at how gold has performed over the last 17 years, it's been one of the best-performing asset classes in the world," Mr. Russo said. "Pretty much ever since Australia sold its gold, it's been on the up." ...
... For the remainder of the report:
http://www.theaustralian.com.au/business/mark...e-bar-none-w...
* * *
