Posted on 12/01/2004 7:29:42 AM PST by Cicero
Brown's gold sale 'cost the UK £1.5bn' By Tony Freinberg (Filed: 28/11/2004)
Gordon Brown has cost the British taxpayer almost £1.5 billion by selling off half of Britain's bullion reserves just before the gold price soared.
The Chancellor sold 395 tonnes of gold at an average price of $275 an ounce between 1999 and 2001, raising £2.3 billion for the Exchequer.
At the time, gold was at a 20-year market low. It has now risen to more than $450 an ounce. Had he waited, he would have raised a little over £3.77 billion, a difference of more than £1.47 billion.
The money lost translates to a cost of £58.41 to each household in Britain. Currently £1.47 billion would fund 50,840 new policemen, 58,480 new teachers or 57,640 new soldiers.
Last night Oliver Letwin, the shadow chancellor, accused Mr Brown of selling Britain's gold reserves at "knock-down prices".
At the time of the sale, many analysts claimed that the Chancellor's decision to part with half of Britain's gold reserves - overriding, it is said, the objections of senior Bank of England figures - was motivated by political rather than economic factors.
Selling gold was viewed as an important precursor to joining the euro, because membership of the single European currency limits a country's need for its own currency reserves.
In May 1999, Lord Lawson, the former Conservative chancellor, said the sale was "clearly motivated" by a desire to join the single European currency.
Patricia Hewitt, who was then the economic secretary to the Treasury, denied that, telling MPs that over time gold had been "a very poor investment", an assertion that clearly she would not be able to make now.
Since the Government's sell-off, gold has been an excellent holding, rising from a 20-year low of $255.95 on April 2, 2001, to a 16-year closing high of $451.70 on Friday. The price of gold has been buoyed over that time by the declining strength of the United States dollar.
Mr Letwin demanded an official explanation from Mr Brown. "People want to know where their money has gone," he said.
"The answer is that it has been wasted not only on 300,000 extra bureaucrats and £1,000 chairs for Ministry of Defence officials, but also on selling gold at knock-down prices."
Vincent Cable, the Liberal Democrat Treasury spokesman, emphasised his party's belief in the importance of substantial gold reserves during a war against terrorism.
While Mr Brown insisted in 1999 that the gold sales were necessary so that the Exchequer had a "better balance" across its holdings, Treasury officials said yesterday that there were no plans to sell off further reserves.
The Treasury said: "The Public Accounts Committee addressing the conduct of the gold sales programme concluded that the Treasury had been rigorous in its approach to achieving a reduction in the riskiness of the portfolio."
Labour would probably have been voted out long ago if the Tories offered a decent alternative. Other than Tony Blair's support for the Iraq War (a very big "other"), they have scarely done anything to benefit their country.
Oops. Why in the world would someone sell off that much gold at historically low prices?
to keep the price down
A generally-unspoken mystery of our global financial environment. Brought to you by...THE CABAL. (insert sinister minor chord).
Seriously.
Just a smart cookie.
Possibly. The Bank of England sold gold on an announced schedule, so each time a sale approached the price would dip. They were famous even at the time for invariably selling at the bottom.
If it was part of a plot to keep the POG (price of gold) down, then it was pretty stupid. England hadn't anything to gain by doing that, and I doubt that they will be repaid by whoever might have put them up to it.
Opinions vary as to whether the central banks were manipulating the price of gold. In any case, it could only have worked for a limited time, as events have shown. France and Germany announced more gold sales, but it is now uncertain whether they will go through with them.
In any case, it's a pretty good illustration of Labour Party economic incompetence. As I said before, it's too bad the Conservatives have offered no principled alternative to Labour.
Central bankers are political hacks who know nothing about the free market and its trends. Why countries trust a nation's money supply to a government protected cartel run by unaccountable bureaucrats is beyond me.
BTW, Gordon, you lovable genius, I bought some of your gold at your fire sale. Thank you so much.
Love and xxxx.
Yeah thats the problem, for all we know there's canned soup in there.
While he was selling, I was buying.
Likewise.
Brown's gold sale was one of the chief reasons that the gold price fell to a 20-year low. Now he's quit selling off the UK Treasury and gold is on its way back up.
Few laws of human affairs work so well as the law of supply and demand.
They sold off half of the Bank of England's reserves, which had been accumulated by their ancestors over hundreds of years. They would have sold paper first, I presume, but that paper entitled people to collect bullion, sooner or later.
As you say, no one knows for sure whether the gold is in Fort Knox still. There was considerable suspicion about what may have been agreed to by Bill Clinton, Allan Greenspan, and former Treasury Secretary Rubin, who is a very smart but corrupt financial operator. Rubin was the one really competent heavyweight clinton ever had in his cabinet, but he was not necessarily a patriot.
Does anybody know who bought much/all of the gold the UK sold?
For the past decade or so, I read these stories about various central banks selling gold on a massive scale. Thing is, they never seem to mention who is buying.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.