The Brown Bottom

With the gold price hitting new nominal highs I thought it was a good moment to remind ourselves about the consequences of Gordon Brown’s sale of much of the UK’s gold reserves.

In 1999-2002 he sold 395 metric tons of gold at an average price of $275 an ounce. Today the price stands at $1749 an ounce. No wonder Brown’s sale on the gold price charts is known as The Brown Bottom. He also gave notice to the market that the sales would take place, thereby giving market participants every opportunity to drive the price down in advance.

Here are my calculations of the value which would have accrued if we still held the gold today:

	Sold then	Value now
	99 - 02	2011
Quantity sold tons	395	395
Average price $/oz	$275	$1,700
Sum realised US$m	$3,477	$21,492
Exchange rate avge.	$1.52	$1.63
Sum realised £m	£2,287	£13,185

The 2012 Olympics are estimated to cost some £9billion, so we could have paid for the Olympics with the amount of value he surrendered and had over £2billion in change left.

As of December 2010, estimated gold reserves were as follows:

US	8,133 tons
Germany	3,401 tons
Italy	2,452 tons
France	2,435 tons
UK	315 tons

The impact of the man’s stupidity is breathtaking.

 

Comments

[James Hunter-Jones]

Sometimes I feel like this blog spends too much time raking up the past - I think everyone knows Brown made a mistake selling our gold reserves by now.

[Paul Canal]

Gordon's disciples, Ed Balls, Ed Milliband and Yvette Cooper still "don't get it".

Their rage against the cuts fails to realise we are still spending more than we earn.

A state that rewards indolence and failure through an unaffordable welfare system and allows a self perpetutaing elite to swap jobs, sinecures, EU roles and unfunded, unaffordable gold plated pensions whilst the country continues to inexorably decline is in serious trouble.

[Patrice]

Terry,

I guess it is always easy to make this kind of comment looking back and having all the data in hands.

Did you ever write an article at the time advising against this move?

What I find surprising is that Gordon sold more than 1/2 the UK reserve of gold. That's a bold move (but unfortunately was a bad one as well).

[Prohyp]

I'm more inclined to think that it was more an ideological, rather than a bold move.

[WILLIAM MCCRACKEN, 2 THE LIMES, LONG ITCHINGTON CV47 9PG]

Go on Terry, keep reminding us of Gordon Brown's arrogance and complete lack of a business brain. He deserves no less for the mess he's left us in.
William McCracken

[Terry Smith]

To James Hunter-Jones

The reason I sometimes focus on the past is because as someone once said "Those who do not study history are condemned to re-live it". In this instance we need to use events like the new gold price high to remind ourselves what damage Brown and his acolytes did to the UK. After all, some of them like Eb Balls are trying to get back into power and change the UK's policy on debt reduction, so we could have a repeat performance.

[Terry Smith]

To Patrice:

I did better than that - I bought some of the gold he was selling. Actions speak louder than words. Brown's mistake was clear at the time and the manner in which he allowed the sales to be executed compounded the fundamental error. You don't see the smarter central banks who have been accumulating gold announce their purchases in advance do you?

[James]

I love that reply to Patrice.

If I would have had some spare cash at the time, I would have done the same, on the basis that Brown was so inept that if he was selling, I would be buying.

[john]

I say Terry Smith for Prime Minister! The UK's only hope.

[Greg]

Read the Treasury's own assesment for yourself and make up your own mind. This wasn't a political move, it was diversification to reduce exposure to a single asset.
http://webarchive.nationalarchives.gov.uk/+/http://www.hm-treasury.gov.uk/d/GoldReserves.PDF

Sounds like a fair strategy to me.

[Mike Muir]

The most alarming part of the saga is the fact that the proposed sale was made public, a fact that I hadn't realised. Ed Balls and Co again? I don't think so.