Untimely sale of UK’s gold reserves cost billions

UK Prime Minister Gordon Brown’s decision to sell the bulk of the Bank of England’s gold at historically low prices has reportedly cost Britain US$10 billion (GBP 6,260 million). In what might be regarded as the definition of calling the bottom of the market, According to London’s ‘The Times’ Prime Minister Brown, who was then Chancellor, sold nearly 400 tonnes of the Bank’s gold at an average price of US $275 an ounce.
The sale raised about US $3.9 billion between 1999 and 2002 but had he sold the metal this year, he would have raised US $13.8 billion, based on an average price of US $978 an ounce.
With the Treasury frantically trying to cut spending and raise debt, the disposal of the UK’s bullion a decade ago looks to be a misjudgment. The Conservatives have called it a “spectacular display of economic incompetence”.
The report explained also that the premature sale is made even more galling by France’s decision to hold on to its reserves and start selling only in the past couple of years. This year France sold 73.4 tonnes raising US $2.5 billion.
That was on top of 113.5 tonnes sold last year at an average price of US $872, raising US $3.5 billion. The French have made 50 per cent more than Gordon Brown by selling half as much gold.
The Bank of England holds 310.3 tonnes of gold, worth US $10.7 billion. Prime Minister Brown’s fire-sale means that the UK now ranks 16th in the world for gold reserves, according to the World Gold Council. It is between Venezuela at 15th and Lebanon at 17th.
At the time of Gordon Brown’s gold sale in 1999 there was speculation it was part of a plan to ensure that the UK was prepared for entry into the European Union’s single currency.
Other central banks were also unhappy with the decision to sell as they had agreed to limit their collective sales to 500 tonnes a year.