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Value drops but State is still sitting on €178m pot of gold

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WE'RE sitting on a small pot of gold and it's likely that few of us even realise it, with the Bank of England babysitting some of it for us.

Latest figures released by the Central Bank yesterday show the value of our gold reserve now stands at €178m – down from €266m in the final months of last year.

Ireland has six tonnes of the precious metal, including coin stocks held by the Central Bank here in Ireland and gold bars held at the Bank of England's high-security vault.

In terms of tonnage, we rank pretty far down the list. Out of 100 countries, we're at number 81, according to the World Gold Council.

Its latest statistics for this month show that the United States, the world's biggest economy, tops the list by far for the country with the largest gold holding, at 8,133.5 tonnes.

Germany follows, with 3,390.6 tonnes; and then the International Monetary Fund (IMF), Italy, France and China. The UK is 18th on the list with 310.3 tonnes. Yemen and Albania have the least amount, tied at 1.6 tonnes.

Trinity College Dublin Professor of Finance Brian Lucey says it makes sense for the Irish state to store its relatively small reserve in the Bank of England, which already has high security in place.

But what do we use it for?

"It's a long-term store of value, a long-term hedge against unexpected events," Mr Lucey says.

"Some countries, some Central Banks like India, hold a lot more gold. Other countries hold very little. European countries tend to hold quite a bit, although the UK and Ireland, not so much.

"It's a national preference as to what you do or don't do. Central Banks go through phases where gold is popular or not. We sold off a big chunk of it back in the 1990s.

"From the perspective of a Central Bank holding gold reserves, the day-to-day or year-to-year fluctuations really are irrelevant unless there's a massive boom or massive slump.

"It's simply part of a diverse portfolio."

Gold futures fell to a one-week low on Thursday amid speculation that the US would avert a default, eroding demand for the precious metal as a haven – something it has long been seen as.

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The value of the metal had inched higher amid worries that the default deadline was drawing near.

Mr Lucey says its reputation as a safe bet will likely continue, with an enormous shift in the gold market now towards the East.

"It's a safe haven against certain kinds of movements.

"It tends to either go up in value or it prevents the portfolio from falling as much as it would have otherwise. It's a bit of insurance. That's been the case," he said.

For now, our few bars of gold will sit under the watchful eye of the UK authorities.

We know where one pot of gold is.

Finance Minister Michael Noonan will be holding another €600m one on Tuesday.


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