Tuesday, June 2, 2009

10-Year Anniversary of Gordon Brown's Gold Sale

Gordon Brown, before he became prime minister, was the Chancellor of Exchequer. One fine day in May 1999, he decided that Great Britain needed to rid herself of some gold.

Between July 1999 and March 2002 the British Government sold 395 tonnes of gold, almost 60% of the UK's gold reserves, at a near-bottom price: average price of $280 (£186) per ounce. Mr. Brown then put the proceeds into Euro, US dollar, and Japanese yen.

The Gordon Brown Gold Rally Indicator flashes buy signal
(4/20/09, Michael J. Kosares, usagold.com):

The article has a nice chart showing how Gordon Brown insisting that IMF should sell gold can be used as an indicator for a fresh bull-run on gold. The article is very much worth reading, too.

It has a link to IMF's Q&A site about gold sale. There you can find that the IMF gold is priced at $88 per ounce on their balance sheet as of February 2008, that 2,814 metric tons of gold out of total 3,217 tons can be restituted (returned) to the member countries at about $56 per ounce.

I'm trying to find WHY (these days that's my theme) Gordon Brown decided to sell that much gold. So far, I can't find any (that's another theme). Here's Times London's article from 2 years ago. They think it might have been to prop up Euro.

Goldfinger Brown’s £2 billion blunder in the bullion market
(4/15/07, Times Online)

"GATHERED around a table in one of the Bank of England’s grand meeting rooms, the select group of Britain’s top gold traders could not believe what they were being told.

"Gordon Brown had decided to sell off more than half of the country’s centuries-old gold reserves and the chancellor was intending to announce his plan later that day."

Just like that.

And he did it by auction. According to one gold trader quoted in the article,

“The joke in the market was that Gordon had guaranteed he would get the worst price,” said the former gold dealer Dominic Hall. “The world and his grandmother shorted the market...."

10 years later, gold is approaching $1,000 for the 4th time in 2 years. It is trading at $982 per ounce today.

(And who bought that Gordon Brown's gold, cheap, at those auctions?)


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