Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Brown’s Gold bottom and the Toffee Top

Commodities / Gold and Silver 2012 Mar 29, 2012 - 08:20 AM GMT

By: Jan_Skoyles

Commodities

Best Financial Markets Analysis ArticleJan Skoyles looks at Gordon Brown’s reasons for selling half of Britain’s gold over ten years ago and asks have we reached the top of the gold market thanks to George Osborne’s rediscovered interest in our gold investments?

Last week George Osborne, never one to miss a swipe at the opposition, made the effort to remind everyone of Gordon Brown’s Bottom.


I can confirm our gold holdings have risen in value to £11 billion. This does not include the 400 or so tonnes of gold sold a decade ago for £2 billion, and which would now be worth six times that at over £13 billion pounds.

He is right; Britain’s gold would now be worth over six times that it was sold for. But is he right to be sneering about it? Perhaps not considering that, according to the Treasury, there are no plans to further increase our gold reserves.

Britain’s lost gold would pay for Olympics

Between 1999 and 2002, Gordon Brown sold 395 tonnes of his country’s gold, when the price was at a 20-year low. The average price achieved with the sales was $275.6/ounce. If the gold had been sold today then the British people would have received some £13 billion. This would have paid for the Olympics and it is more than Britain lost when leaving the ECRM.

As we all know, the former Chancellor and Prime Minister has come under plenty of fire since his fateful decision.  The anger Brits felt towards Brown for selling the gold has been rechanneled towards him, several times, most significantly for claiming there was no longer a boom/bust culture in the economy; we were all caught out by this in 2007 when Northern Rock collapsed.

According to the BBC’s Robert Peston, Gordon Brown and his advisors became fixated on the idea of selling the gold, ‘they hated what they perceived as the intrinsic laziness of gold. It simply sat in the vaults gleaming but earning no interest. They wanted assets that appeared to earn their keep, by generating interest payments. They also hoped and believed that rampant global inflation was a thing of the past, and that the days of gold’s soar away success would never recur.’

How wrong they were. Rampant global inflation is unfortunately very much a thing of the present and of the foreseeable future. Gold’s soar away success is something which has been current since Brown’s bottom and will continue to be, at least until the devaluation of paper money ceases.

Why sell the gold?

But was it just because of a dislike and distrust in the yellow metal?

As Philip Hammond MP stated in an interview with Max Keiser, the timings of these sales appeared inept. The government alerted the markets to the fact that there would be huge volumes of gold coming to the market, allowing front running to occur. This implies that Gordon Brown was not working to get the best price for the British taxpayers.

It was widely believed that the gold sale was in support of the budding euro and that the proceeds would be used to purchase new euros. However, according to some in the gold world, Brown’s moves were slightly more political than he originally implied.

In Jesse’s Café Americain, back in 2010, it was suggested that Brown sold the gold in order to bailout mega banking empire Rothschild and also AIG.

There is also a credible speculation that the sale was designed to benefit a few of the London based bullion banks which were heavily short the precious metals, and were looking for a push down in price and a boost in supply to cover their positions and avoid a default. The unlikely names mentioned were AIG, which was trading heavily in precious metals, and the House of Rothschild. The terms of the bailout was that once their positions were covered, they were to leave the LBMA, the largest physical bullion market in the world.

Federal involvement in the gold market is a major area of discussion and debate, something which we have touched upon many times in these research pages. After the recent fall in gold there were many accusations that it was not just the market getting spooked about the economy. But, as we also said in these pages, regardless of market rumours, the reasons to own gold are still strong, for both investors and central banks.

Time to rebuild our gold reserves?

So, after his pointed remarks about the amount of gold in our reserves, is George Osborne planning on restocking our vaults? Or is he, like Gordon Brown, using what’s left as a strategic asset?

Britain’s foreign exchange reserves are at historical lows, this weighs, heavily, on our much coveted triple-A status. Something which Osborne, no doubt, has hanging over him. What do we use our reserves for? According to the Financial Times, we use them for ‘precautionary reasons’ for instance; to stop a run on sterling or to pursue monetary policy objectives.

It seems to me that there is no better time economically, or politically, to stock up on ‘precautionary’ reserves.

Currently the official gold reserves of the UK remain relatively unchanged after the sell-off.  According to the World Gold Council’s latest figures, the UK has 310.3 tonnes of gold currently which represents 17.7% of our reserves. We are currently 17th in the world for our gold holdings and according to the Treasury there are no plans to increase our gold holdings.

When George Osborne took his seat as Britain’s most powerful bookkeeper in May 2010, gold finished the month just below $1210. As I write this, gold sits at $1680. Therefore, George Osborne has also missed out on a golden opportunity to buy back some of our gold.

Brown’s Bottom and the Toff’s Top

But now that the current government are showing interest in gold again, this time positively, does this mean that we are now seeing, after Brown’s Bottom, the Toffee nosed top?

One could argue that there is little money available to him to do so. This may be, but somehow countries in Europe have managed to find the funds to increase their gold holdings. In 2011, European central banks became net buyers of gold for the first time in 20 years whilst central banks worldwide, along with official institutions, increased their gold purchases by 571%.

The WGC said of this; ‘this activity reflected a continued desire among central banks to diversify their sizeable reserves in light of credit downgrades which have brought into question the safety of holding massive amounts of US dollar and euro-denominated reserves.’

Moreover, no-one seems to be expecting gold to sink below Brown’s 20-year bottom. Europe’s gold buying activities, both banks and private investors are significant, but what is more significant is the gold buying activities of the BRICs and other emerging countries. These countries, as we have discussed before are in stronger positions than the West economically, not to mention recent moves to abandon the dollar. They are choosing to put their faith in gold rather than other currency based reserves.

As we have recently explained, the reasons for gold’s climb is not because it is sat in an ever expanding soapy bubble. It is because the fundamentals which put it there, mainly instability, systematic devaluation of our money and inflation, are still increasing (no matter what George says).

Protect yourself from bankers and politicians. Buy gold bullion safely and securely with The Real Asset Company.

Jan Skoyles contributes to the The Real Asset Co research desk. Jan has recently graduated with a First in International Business and Economics. In her final year she developed a keen interest in Austrian economics, Libertarianism and particularly precious metals.  

The Real Asset Co. is a secure and efficient way to invest precious metals. Clients typically use our platform to build a long position and are using gold and silver bullion as a savings mechanism in the face on currency debasement and devaluations. The Real Asset Co. holds a distinctly Austrian world view and was launched to help savers and investors secure and protect their wealth and purchasing power.

© 2012 Copyright Jan Skoyles - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in