When the British Government announced last week its intention to sell more than half its gold reserves, it sounded another death-knell for the use of the precious metal as a tool to steer international monetary policy. The sale is the strongest signal yet that the floodgates are set to open as more countries decide to empty their coffers of gold reserves. Coming just weeks after a referendum in Switzerland resulted in Berne abandoning its currency peg to gold, London's decision to sell off 415 tonnes of its reserves over the coming three to four years is an indication of just how far gold's position as an international monetary instrument has sunk. 'The country that practically invented the gold standard, and put gold at the centre of an economy's health is saying goodbye,' said the Virtual Gold Research consultancy's Tony Warwick-Ching. 'They have not sold gold for more than two decades, and now they are getting rid of most of it.' The sale, to take place through a series of staged auctions, will leave only 300 tonnes in British coffers, and will leave gold accounting for only 20 per cent of London's US$37.29 billion reserves, according to the latest International Monetary Fund figures. The move is likely to hasten similar action by other countries. Following the abandonment of the Swiss gold peg, many believe that the country's 1,800 tonne hoard will also start hitting the market soon. Furthermore, the 11 euro countries are also expected to divest their holdings as a means of keeping within the strict budget deficit and public debt limits imposed by the European economic and monetary union. 'I think the continuation of this trend is probable,' said Philip Klapwijk, managing director of commodity research consultancy Gold Fields Mineral Services. 'What's driving it is the ongoing demonetisation of gold . . . Central banks and treasury departments are taking a hard look at the composition of their reserves, and tending to decide that they need not hold such a large proportion of their reserves in gold.' The reason is that gold is simply not generating a large enough return to make it a worthwhile investment. While euro assets yield at least 3 per cent, and United States dollar and sterling assets generate around 5 per cent, the best central banks can earn through the limited gold leasing market is still little more than 2 per cent. Yet the extent to which this rationale is likely to be spread around the world is still debatable. While some, such as Australia - one of the world's largest gold producers - has sold some of its gold reserves. Other countries, such as the US, has hung on to its 8,100 tonnes, and in Asia there still appears to be high regard for the metal. The Hong Kong Monetary Authority has long dismissed gold as an important part of its reserves, holding only 67,000 ounces, or just about two tonnes, the mainland's People's Bank of China has kept its gold reserves at 395 tonnes since 1992, according to IMF data. Similarly Thailand's central bank, which notably spent more than $10 billion in a failed defence of it currency against speculative attack in 1997, has resolutely maintained its gold reserves at a constant 2.47 million troy ounces in recent years. Richard Morgan, deputy editor of industry publication Mining Journal said: 'Not every central bank is going to see it in the same way. 'Asian central banks will want to have a different currency mix from European central banks. Gold still yields higher interest rates than the yen, for example.' Analysts also point out that Asian consumers, particularly among the so-called Chinese diaspora in the region, are much more emotionally and culturally attached to gold as a store of value. 'In terms of physical demand, Asia is very important,' said Karen St Jean-Kufuor, commodities editor at the Economist Intelligence Unit. 'Because of the recent volatility within Asian economies, you can still see shifts into gold.' Most recently, the announcement of a fresh round of elections in India has sparked a rise in gold buying as a hedge against further gold instability, Ms St Jean-Kufuor noted. Industry lobby group, the World Gold Council, also predicts that after a poor year last year, Hong Kong, the mainland, and Taiwan in particular, should see gold demand increase. Indeed amid forecasts that the financial crisis has ended, the council believe that the auspicious Year of the Rabbit for weddings and other ceremonies, will trigger a sharp interest in gold buying, and dismiss any suggestion that the commodity is dead.