The price of gold slumped to a 20-year low in the wake of the first auction of 25 tonnes on July 6, and Tuesday's sale via the Bank of England comes as the price languishes around $255 per troy ounce.

Opposition conservative leader William Hague has already jumped on the issue as a way of embarrassing the government, calling it incompetent and a waste of taxpayers' money.

The issue has been a convenient one for Hague as prime minister Tony Blair's government rides high on the back of unemployment and inflation at record lows and growth picking up.

Chancellor of the exchequer Gordon Brown, who announced the sale of 415 tonnes of a total of 715 tonnes of reserves in May, called the decision a technical one. The money raised from the sales will be invested in government bonds denominated in dollars, euros andyen.

Bank of England governor Eddie George has defended the decision as ``perfectly reasonable,'' given the country's exposure to gold, an asset whose price has been falling for 20 years and which earns no return.

The government was sticking to its guns on Friday. ``Our gold sales are a sensible and prudent management of reserves,'' a treasury spokesman said.

``Ask your pension company how much of your money is invested in gold,'' quipped another treasury official.

While many governments, gold producers included, have been selling off gold in recent years, and Switzerland plans to ditch 1,300 tonnes, the British decision to sell touched a raw nerve with many, not least South African gold miners already hard hit by the low gold price.

A high-level delegation of South African mining officials and politicians visited London in July in a last-ditch attempt to persuade Britain not to proceed with the sales. South Africa has also run down its gold reserves during the 1990s.

The International MonetaryFund, too, has been discussing selling around 300 tonnes of its gold reserves to finance a debt relief plan for poor countries. But it now looks as if it has come up with a scheme which will keep the gold off the market.

History makes Britain's decision more sensitive. London is home to the world bullion market and thus its spiritual home, even though Britain ditched the gold standard in 1931, and economist John Maynard Keynes famously dismissed gold as a ``barbarous relic''. The yellow metal has a psychological significance, having been mined and worshipped for thousands of years and been considered a great store of value. But that quality is diminished in a period of low inflation.

Britain's sale of gold is spread over four years. It plans to sell the 415 tonnes in lots of 25 tonnes, compared to annual world production of 3,200 tonnes, about four per cent of the world's gold supply each year.

South Africa, the world's biggest gold producer and the most vocal critic of the British sales, itselfproduced 464 tonnes last year alone.

``Twenty-five tonnes is not much. Most pop stars have more in their earnings,'' said a London precious metals analyst. And the gold price is not weak because nobody wants it -- the World Gold Council has said demand is running at record levels -- it is weak because there is too much supply, say analysts.