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Bank's gold reserves deteriorating

Source PA News

Updated on 29 September 2007

Some of Britain's gold reserves held in the Bank of England are cracking up because they were poorly made.

The deterioration could temporarily cut the value of the country's 320-tonne reserve, which is held by the Bank on behalf of the Treasury.

A Freedom of Information request by trade journal Metal Bulletin revealed that the cracks and fissures had appeared in some gold.

The bank is said to be in discussions to establish exactly how much of its hoard is involved, although it is only believed to be a small proportion.

The quality of gold in the UK is defined by the London Good Delivery (LGD) standards laid down by the London Bullion Market Association.

The affected bullion, originally imported in the 1930s and 1940s, falls below the proper LGD standard.

This is due to the poor refining processes used at the time, which is thought to be the cause of the deterioration.

A Bank of England spokesman insisted the problem was only superficial and not an issue of the gold's purity. But the affected gold would attract a lower price were it to be sold now and the bank would have to re-refine it to bring it up to standard.

"This is not about purity, this is about physical appearance," the spokesman said.

Gold is held by the Bank of England as an insurance policy in case of turmoil in the world's money markets. The complete British reserve is currently worth around £4 billion.

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