Gold Reserves And The Bank Of England

The Bank of England, being the main bank of England, serves as a model for the rest of the banks within the country. It was introduced for the first time in 1694 as the English Government banker. In 1734, the bank was shifted to the famous street of London city known as the ThreadneedleThread needle Street.

The Bank of England was nationalised on 1 March 1946, and gained independence in 1997. Being the central bank, it forms a base for the financial systems in England. The bank is responsible for many functions, mainly ensuring economic stability throughout the country. Its first function is to draft the monetary policy and ensure price stability as economic conditions are very dependent on the currency fluctuations. It is important to keep inflation in check and ensure suitable interest rates in the economy.

The most important attribute of the Bank of England is to lend money to the other banks of the country in times of trouble. When any of the banks within the country is going through financial turmoil, the Bank of England lends loan in order to prevent the bank from going bankrupt. In this way, it plays its role of maintaining economic stability in the country.

The Bank of England comprises gold reserves as insurance, and its value is nearly 4 billion. These gold reserves are held with this bank for over 300 years. In 1999, major part of these gold reserves was sold off in order to improve the bank reputation in the country. This has also helped in increasing the currency storage of the bank. Moreover, nearly 400 tonnes of gold were auctioned in this regard.

In the year 2007, the news spread that the bank is in a critical condition as far as the gold reserves are concerned. It was found that cracks were produced in the gold which could make it difficult to be sold. Thus, it was thought that the value of gold will decrease remarkably. It was present in forms of gold bars and coins.

This entire situation made it nearly impossible to trade the gold in the world market. The economy of the country is entirely dependant on the actions of the Bank of England. At that time the demand for gold was on its rise that is why the price of gold was also high.

However, the selling of gold at low rates led to the sudden fall in it price due to which many investors had to lose their investments. As the gold was in its desired condition so bank had to sell it on considerably lower rates.

Due to this act, the Bank of England had to face a lot of criticism as this action was supposed to destroy the economy of the entire world for the upcoming years. It caused a loss of nearly 3.8 billion pounds but due to a good standing of this bank, this loss was overcome in short interval of time.

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