Robert Key: To ask the Chancellor of the Exchequer how many tonnes of gold have been sold from UK reserves in each year since May 1997; what revenue was received from sales in each year; and if he will estimate the revenue which each sale would have generated at current gold prices. [244303]
Ian Pearson: 395 tonnes of gold have been sold since 1997: 75 tonnes in 1999; 150 tonnes in 2000; 130 tonnes in 2001; and 40 tonnes in 2002. The date of, the amount of gold sold and the allotment price at each of the 17 gold auctions is set out in the following table. (see Hansard 18 Dec 2008 : Column 932W). The total proceeds from the sales were around US$3.5 billion. At the morning fix on 15 December 2008 the total value of this gold was US$10.5 billion. The gold sales between July 1999 and March 2002 reflected a prudent decision to reduce over-exposure to a single asset in the net reserves portfolio.
Tuesday, January 06, 2009
Government Admits It Blew $7 Billion on Gold Sale
The Government admitted in a parliamentary answer just before Christmas that had it not sold much of Britain's gold reserves during its first five years in office, the public finances would be $7 billion better off. That's around 2p off income tax. Even more astonishing is the news that the sale of gold reserves at the bottom of the market was justified as "a prudent decision to reduce over-exposure to a single asset in the net reserves portfolio." I'd love to know what was an imprudent decision. Possibly one where you go ahead with a sale of reserves ignoring warnings of the consequences...
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So the exposure to gold was £3.5 billion, yet by selling it they lost £7 billion. How is that prudent?
Iain, Good post but I think it's seven billion dollars (not pounds). Still a lot though and made worse still by the collapse in the pound.
In an emergency and if the pound loses credibility as a currency we may need gold to buy things, e.g. food.
Scary B..I think if you read Iain's post, unles he's altered it, he does say 7 billion dollars.
Whatever, it still a bloody lot of my money that's been spunked up a wall.
Prudence? The idiot doesn't even know how to spell it.
and yet Gordon Brown does not accept this. He blames the Tories (of course)
Watch him here
http://uk.youtube.com/watch?v=RDm8zGwcdZ4
Apologies, I have now corrected it with a $ sign.
Gordon Brown's ego must be the most expensive in UK history.
On the world wide front you have to assume that Hitler's cost more, but then Brown's career isn't over yet !
Will they be listing the schools and hospitals they will have to CUT! to make up the shortfall?
This may not be the whole story. What was bought with the proceeds? If you rebalance a portfolio of assets, the realised cash has to be placed into better performing ones or ones which research would show ought to perform better(even the Treasury might understand that concept). So the question is what happened to the proceeds or were they "spent"? The losses today may be much bigger.
The correct value of gold is the current market price at any time. So Brown cannot be held liable for subsequent price gains.
What he should be shot for is telling the market he was going to sell before he did so. The price tanked and then he sold. What a fuckwit!
the conspiracy theories suggest it's worse than incompetence
they revolve around a reported statement of Eddie George's that it was done deliberately to lower the price of gold to save certain players' skins ...
Pah! Old news...
OK, it's nice of HMG to actually admit it, albeit in their usual weasally way. I doubt the MSM will notice because they're too busy w*nking over Gaza :(
...a prudent decision to reduce over-exposure to a single asset
Prudently, as the banking crisis unfolded, many investors reduced over-exposure to a single bank and spread their saving over a range of banks.
If Ian Pearson’s explanation is correct, and this was simply about reducing risk within the “net reserves portfolio”, the mix of assets would change but no funds would have been transferred out of the portfolio. So what new assets replaced the gold and what has happened to their value? Or could it be that we sold the family silver and frittered away the proceeds?
Hold on - you can go and show your appreciation of Gordon financial genius at the No 10 web site where there's a petition to have him sacked for financial incompetence .
Go here. ( How long before the Brown shirts remove that one ? )
Hooray!
The brave IDF have just bombed a UN school in the concentration camp and killed 40.
That'll teach them
No doubt some greedy bankers got very rich out of this - so thanks again Calamity Brown.
This is NOT equivalent to 2p off tax Iain. It is $7 Billion - yes scarey, not pounds, variations in exchange rates being another factor in this, possibly making the sums worse now, or not necessarily, there's no reason to assume from the information provided that they were held as sterling or dollars or euros or yen - and it is over TEN YEARS and how much was "lost" depends entirely on what was done with the $3.5Bn reserves instead of holding them in gold.
I see you've corrected the £ sign Iain, good. Will you now correct the 2p on the tax gross error? Wrong by a factor of ten, unless you re-commute or specify the time period e.g. "for a year". And perhaps you could enquire what if anything the reserves were held in instead and how that alternative has performed or what finance costs their use to pay for things avoided?
Need to focus on Willie's and Mark Fullford's comments. What is important is how this "prudent decision to reduce over-exposure to a single asset in the net reserves portfolio" has panned out? A questions should be tabled asking to compare the performance of the portfolio had the fire sale not taken place.
Get in there...
We the undersigned petition the Prime Minister to resign due to gross financial incompetence in running the British economy.
Submitted by Alex Wallace – Deadline to sign up by: 15 January 2009 – Signatures: 592
http://petitions.number10.gov.uk/Fianance
Iain remember these are long term investments, to put everything is gold is as silly as putting everything in an Icelandic Bank. As it happens lots of the gold cash was invested in euros...
Theo Blackwell's blog said...
As it happens lots of the gold cash was invested in euros...
----------------------------------
Yes and Project Europe was the reason why the gold was sold - nothing whatsoever to do with 'prudence' and everything to do with bolstering 'The Project'.
This man truly is a midas in reverse. Everything he lays his grubby hands on turns to s**t.
Government admits it but whenever Sir Pete Tapsell raises it (err.. every day) he gets bullshitted by the Prime Minister. It's disgusting. There's a difference between spin and bullshit - Labour can't tell anymore.
A shocking error to be sure. And bullion dealers in the city still refer to the big dip in gold prices of 2002 as "the Brown bottom".
But I reckon a bigger c*ck up was to sell Westinghouse, our only nuclear power-station builder, to the Japanese in 2005 for $4bn. We have yet to pay the full price for that bad decision.
"That's 2p off income tax"
How did you work that one out? Is that 2p for one year only? Have you accounted for any incentive effects? Are you sure you mean pence and not cents?
Well how about this then:
No 10 petition: We the undersigned petition the Prime Minister to resign due to gross financial incompetence in running the British economy.
This is nonsensical.
Financial markets are efficient. No-one knew the price of gold was going to rise in 1999-2000, or if they did they don't seem to have bought much. Other governments were selling, mining companies were selling more than they could mine (forward selling).
Furthermore the government bought interest-paying assets, 40% in euros, 40% in dollars, 20% in yen. These will not have grown as much as the gold would be worth, but can you guarantee that in a few years?
Pre-announcing a sale is good practice by the way. It is how all government bonds are sold and works of art, last time I looked.
Finally, the Conservatives could have sold gold at $850/oz in 1980, and invested it in interest-earning assets. By now that would have been worth much more than the gold. Was this also a catastrophic error?
Good points, Matthew.
Matthew. Governments hold gold for reasons other than just its market value. In time of war few will accept cash payments. In WW2 the USA received payments from Britain in gold for supplying various items required for survival, just in case we were going to lose the war and our currency became worthless.
Brown sold our gold as a political gesture. He and Blair had hoped to slide Sterling into the Euro, but were forced by opposition to back off. By selling gold, Brown was saying to Europe, don't worry, Sterling will not be around forever. Look. We're even selling our gold now as we are so sure of our European future.
The cost to Britain of holding few gold reserves could be a lot more than GBP 7 billion. If Russia were to invade the Baltics, the Crimea and start ops in Romania heading west, they can be sure that Britain will find it hard to rearm herself using a currency that few want to hold and having no gold reserves to talk of.
Brown has weakened us strategically, not merely economically. The EU is weak as shit militarily and Putin knows it. Look he's even cutting off the gas supply that we are now dependent on in the middle of winter, and he fears no reprisal of any kind in return. His walk into Georgia will no doubt not be his last foreign adventure.
The European future that Brown and Blair have sold us out to has made Europe a far more dangerous place. We could do with our gold, to ensure that our enemies know we are strong and can hit back. By weakening ourselves, Brown has helped our enemies.
By the way the gold hype is a bit misleading.
Gold fell from $1030 an ounce in March to about $850 today. It has just completed an upwave since October when it hit $690. The next move might well be down, and maybe down to much lower levels.
The biggest gold market in the world India has halved its demand in 12 months, and is at about 20% of usual levels currently. This must impact on the gold price, where the financial folk are always trying to ramp up the price, and putting out stories of coming rampant inflation, when in reality it is deflation which is rampant.
Governments are keen to raise cash by selling gold, and could well be playing a double game trying to keep the market high.
In the currencies the weakness is back in the Euro's court. The US is open about its troubles and is dealing with them. Europe prefers to sweep things under the carpet, and cover up the troubles. What's the betting that this year's financial crisies will be mainly European?...with the Euro taking greater and greater hits.
To Brown's credit at least he didn't put us into the Euro. But make no mistake he would have done if he could have. And he is still keen to sink Sterling if he can.
There is much evidence that he engineered the banking crisis to some extent (by going public and sinking share values so he could buy cheap) so he could take over Britain's banks, bring the housing market into check so that he could finally bring Britain's economy into line with the eurozone.
The big losses will come as shares like RBS fall from the 63p paid by Brown to maybe 6p. The British tax payer could lose GBP 100 billion from Brown's banking takeovers, and much more than that from the loss of our currency.
Brown's gold sale was criminal, but it is a minnow compared to his banking crimes and the possibility that he will sink Sterling deliberately making GBP 100 billion losses for our economy to meet his political objective...that of destroying Britain as an independent country.
It's 'criminal' to privatise state assets. Oh come on.
On the impressing Europe, I suggest that selling an asset of which Germany is the world's second largest holder and France the 4th and Italy 5th is a strange way to go about it. I assume that was why Australia sold its reserves tool
Think before you say things please.
Also, clearly people here wouldn't condemn Geoffrey Howe for not selling gold at $850 in 1980, so I guess you are mainly of the buy & hold mentality.
So would you suggest George Osborne commits to a poiicy of buying gold when the sterling price falls below a certain level, or would you just suggest he buys gold with every spare bit of cash he has at any price?
It seems to me that gold is the currency of last resort. Countries should keep enough (lots?) of gold to ensure that they can pay their bills in times of crisis (Now?). Brown's sale therefore weakened us strategically.
As to price at which the sale was made, who knows? At the time it may have seemed a sensible asset allocation decision to swap gold (a non interest bearing asset) for sovereign debt which does pay a interest. But as these bonds would have been denominated in fiat currencies, and as we know governments cannot be trusted with money...
Then Brown then went on to trash Sterling by massive expansion of the money supply and the Gold price, as priced in smaller Sterlings, went up. So the problem is not only with the sale of Gold at the wrong price and at the wrong time but with Brown's related fiscal failure with Sterling.
I have not been able to find one, but I'd love to see a graph with all the major currencies plotted against Gold as a straight line. I bet you'd find that they all bounce around it. Gold is, probably, the only sound money.
Brown is clearly delusional and totally out of touch these days, but perhaps his problems started a very time ago.
I think Cherie Blair was right on the money about Brown. Pity her daft husband didn't take any notice, but then he's turning out to be a wierdo.
Lola - gold has fallen from $1033 in March 2008 to about $860 now. Is that the way of the soundest money? Demand for gold has collapsed, and the current price looks very vulnerable bar the efforts of the Fed to keep gold up while various governments cash in their gold stocks to fund economic crisis spending plans. It's a false market which could crack very badly before long.
Matthew - yes it is criminal to sell off gold which might be needed in a major crisis to feed hungry Britons. Brown's management of Britain's economy is nothing less than criminal the amount o money he has wasted. Unless you believe that money grows on trees. Perhaps you do.
oh yes and Germans were not so stupid to throw their own strategic gold reserves away, while encouraging Brown to throw ours down the toilet, Matthew.
It's the most successful form of competition - to persuade your competitors to foul their own nest.
Brown's obliging the EU at every turn, destroying our independent banking system, trashing our housing market, bankrupting Britain with his loony client state, and ending British dominance of the world's financial markets. Soon he will have dragged Britain down to a level the EU can cope with.
Brown could not have done more to destroy Britain had he tried. In fact it is quite possible it has all been done deliberately, as how could anyone make such a mess out of such a success without doing it intentionally?
Yes. Brown is the greatest economic criminal in Britain's long history.
After the dotcom bust, my company pension scheme's trustees admitted that too much of the scheme had been in equities. They noted that then, 2003, was not the time to change this. As the market rose they progressively moved into other securities. The scheme is now well funded. It seems a pity that the treasury did not have the sense and patience to follow such a simple strategy.
Tapestry,
Could you provide some evidence that the Germans encouraged Brown to sell part of the UK gold reserves?
Ian - that's a lovely story about how your company's pension fund made one huge investing error and avoided another. This beats the UK government & gold (not selling in 1980, selling in 1999) which made two errors. And yet you want the government to control MORE of the world's gold supply and private individuals LESS? How weird.
Can I make a plea that commenters learn what a 'market price' is?
Tapestry.
Yes, the gold price has gone down, and part of this will supply and demand driven. But, I hold to my point about gold being the fundamental currency against which all other currencies are/can be measured. Look, I am not absolutely sure of my argumnets here - I need to do more study - but it seems to me that governments having a monopoly over the manufacture of money will always tempt them to ruin it. They confuse the making of it with the value of it, just look at Mugabe. So, much of the 'increase' in the price of gold will be down to the inflation of the fiat currencies. On top of this will be a demand driven increase as nervous investors move from holding currencies to holding gold. Unwinding this demand driven component of the price increase may now be what is happening.
Personally - if I was a country - I'd be very interested in increasing my gold holdings over time to increase security for my compatriots. I would not do this by speculative buying and selling like Brown but by steady regular acquisition. How much to hold? I have no idea, but I bet there is some reasonable ratio that could be devised.
Sorry Ian, it is not 2p off income tax, it is £7 billion off the National Debt.
The Governemnt, like any business or household has a profit and loss account, (income and expenditure), and a balance sheet, (assetts and debts).
Sadly, that £7bn is just an inkstain on the ledger of debts run up by Brown since he last balanced an annual budget, (March 2001 if you are interested). But it might have been a useful thing to have had in ones back pocket to allow an earlier return to tax-cutting.
gold = real money?
down again today at $840 and falling nicely.
Hello $500 within 6 months.
Deflation will drive the gold price down as fast as everything else. The only reason governments are trying to hype gold as 'real money' is because it happens to be what they hold and have to sell to fund their bank rescues etc.
Gold can act as a counter to inflation but the world hasn't got inflation. It's got deflation.
I think people might notice before long and gold will be trashed as surely as oil, stocks and all other assets.
Governments hold gold for the times when cash money is not tradeable, as in war time. Deflation might lead to war in time here and there, and often has done throughout history. But that is why and when gold has value, not as an asset which can defeat deflation. Gold cannot and won't.
matthew - try Timesonline April 2007.
Thanks Tapestry, and forgive me if I missed it, but I looked for Germany or Bundesbank and the only reference was in the world war or that they were keeping hold of their gold. Where's the bit where they pressured Brown to sell?
I'd be interested to know, incidentally, if the two investment banks mentioned in that article were long or short gold at the time the sale was announced. I suspect the latter.
But let me know about Germany. Was that the wrong link?
Yawn.
I cannot be bothered.
It says that Brown is said to have sold gold in support of the Euro. Maybe you are aware that Germany is loosely connected with the eurozone project.
I can see that with you I will never win.
White flag.
Tapestry,
It's not you can't be bothered. It's that you have no evidence.
The report mentions euros twice. Once to mention that the proceeds from the gold sale were being invested 40% in euros, 40% in dollars, and 20% in yen. This then was at least as much 'propping' up the dollar as euro. But if you know anything about forex markets you'll know that a purchase of just over a billion dollars makes diddly squat difference.
Hence the second mention which is something like unnamed sources said they believed it was to prop up the euro. Well it makes no sense, but also it's not backed up with anything either.
Finally of course you then assume that the Germans wanted a strong euro. We're so far away from the gold sale being related to a strong euro that this point is hardly worth dwelling on, but in discussions about the euro no-one ever seems to suggest this is what the German position was in 1999-2002.
the second mention which is something like unnamed sources said they believed it was to prop up the euro. Well it makes no sense, but also it's not backed up with anything either.
You found it. well done.
However propping up the Euro is not suggested by the article, but political support, the point I was making.
This thread is examining why Brown sold half of Britain's gold against all the advice given at the time, and when the price was historically at a low point. The only explanation that holds water is the political one as with so many of Brown's apparently inexplicable actions. He wants to please Brussels, and the EU.
Germany is a prominent EU member.
You said the Germans encouraged Brown to sell gold. Now you are saying Brown sold gold in order to please the Germans. They aren't the same, but there's no evidence for either.
I'll try my hardest to understand your word.
Germany, France and Italy all were committed to the euro and joined with gold reserves 3-5 times higher than the UK. But the Germans believed the way the UK could show commitment was to sell its much smaller gold reserves, and to that end they encouraged Brown who was a willing accomplice.
All the evidence you have for this is:
The driving force behind the decision is still not known, although it was said at the time that Brown was suspected of attempting to prop up the newly launched but beleaguered euro.
[which apparently doesn't mean prop up in terms of the forex markets, but politically]
I'd keep the tinfoil hat on if I were you.
The point being made by the Times is that there was no financial or strategic advantage in selling the gold, and therefore Brown is strongly suspected of seling the gold for political reasons - in this case to show solidarity with the Euro by undermining Sterling.
Brown's economic crimes are all committed because he is totally focused on political objectives and doesn't give a fig about the economic consequences. That is why Britain is in such a dire financial situation now.
I tried to give you a nudge by showing you that even a national newspaper mentions the notion of Brown acting politically when selling off gold reserves, or taxing pensions, driving out oil companies from the North Sea and so on. He wants his headine, and bugger the real world consequences.
Horses that don't drink water when offered are tiresome. But horses that crap on the hay so it cannot be eaten ought to be shot.
Keep going, tapestry.
Mattyboy will get there...
In the end.
The fundamental problem, I think, is that Statists like yourself don't understand free markets. The market price of gold is the world's best estimate of its value. Expert advice has a track record of predicting these things of zero. As Mrs Thatcher once said 'you can't buck the market'.
So when Brown sold gold at auction, all the bids were within about 2% of the price it sold at. No-one bid anything like the current price.
Your argument now comes down to a 'national newspaper' said it. Or well quoted anonymous sources saying it. It's pathetic.
It's perhaps pointless, but I'll make one more go at breaking through the tinfoil.
If there was 'no reason' for selling gold, then that 'no reason' was bizarrely followed by the central banks of Australia, Belgium, France, Spain, the Netherlands, Canada, Jordan, Luxembourg, etc.
All presumably to please their Masters in Brussels.
If selling gold at a historic low were Brown's only economic crime, he might be forgiven.
Australia and Canada had so many tons of gold in the ground they don't need much in bank vaults.
The Europeans were showing soidarity with the Euro trend of the time where selling gold was presumed to show confidence in the disastrous currency now craeting massive unemplyment across a continent, and financial deficits of unparallelled scale.
As for Jordan, great breats and all.
I meant
breasts
solidarity
creating
unemployment
too much strong beer. sorry.
The Europeans were showing soidarity with the Euro trend of the time where selling gold was presumed to show confidence in the disastrous currency now craeting massive unemplyment across a continent, and financial deficits of unparallelled scale.
Er...because its too strong, surely? So they sold gold to weaken it?
You're not even consistent in the same sentence! I'll repeat my plea, stop thinking governments know more than markets and look up what the 'market price' means.
I'm sorry. I cannot think in only one dimension, especially when under the affluence.
Euro is going to be the currency crash story of 2009. You have been warned.
Is anyone out there still ?
China wants a new world currency.
China has just doubled its gold holding.
There must be a message in there,no?
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