Brown’s £2 billion blunder in the gold bullion market

There is more to the story of China retreiving it's gold from GB than is apparent at first glance. Buried in this FT story is a hint of what it was that Gordon Brown sold, against the advice of some of the worlds foremost commodities experts and central bankers. Dontcha love a good whodunit?

'The traders present — including senior executives from at least two big investment banks — warned that Brown, who was not at the meeting, could barely have chosen a worse moment.

In the room, just behind the governor’s main office, they cautioned that gold traditionally moved in decades-long cycles and that the price was likely to increase. They added that even if the sale were to go ahead, the timings and amounts should not be announced, as the gold price would plunge.

“The timing of the decision was ludicrous. We told them you are going to push the gold price down before you sell,” said Peter Fava, then head of precious metal dealing at HSBC who was present at the meeting. “We thought it was a disastrous decision; we couldn’t understand it. We brought up a lot of potential problems at the meeting.”

Martin Stokes, former vice-president at JP Morgan, who was also present, said: “I was surprised they had chosen the auction method. It indicated they did not have a real understanding of the gold market.”

According to other sources, however, Bank of England officials told those present they had “little say” about what was going to happen and that they were “doing what they were told”. This was a decision made by Brown and his inner circle, who appeared uninterested in their expert advice.'

...the lies begin...

'“The Treasury intends to sell 125 tons of gold, 3% of the total reserves, during 1999-2000, with the Bank of England conducting five auctions on the Treasury’s behalf. Auctions will be held every other month starting in July.”

The answer was later shown to be wholly misleading as the government actually planned to sell 400 tons before 2002, representing more than half the country’s gold.'

Requests for minutes of meetings, under GBs freedom on information act, about the sale have been repeatedly denied.

...and the money line...

'Hewitt’s figure of 3% referred to “total reserves” which, apart from gold, included tens of billions that the government borrows on the international currency markets, rather than the gold reserves actually owned outright by Britain.'...My question: exactly who's gold was it that Britain sold?

...Greenspan said shortly after the GB sale...

'Following the government’s announcement of the sell-off, other leading economies rushed to the defence of gold as the asset of last resort.

On May 20, Alan Greenspan, then chairman of the US Federal Reserve and the world’s most respected bank governor, said in response to Brown’s decision: “Gold still represents the ultimate form of payment in the world . . . Germany in 1944 could buy materials during the war only with gold. Fiat money paper [a technical term for legal tender] in extremis is accepted by nobody. Gold is always accepted.”'

foshizzle and WHOGAS...are you paying attention?

...Trichet chimed in...

'The day before, Jean-Claude Trichet, governor of the Bank of France who later became head of the European Central Bank, said: “I will simply say that as far as I am aware — and this is not just the position of the Bank of France and our country but also the position of the Bundesbank, the Bank of Italy and of the United States, and these are the four main gold stocks in the world — the position is not to sell gold.”'

...and the winners, as usual, were those with inside information who went short gold...

'“The joke in the market was that Gordon had guaranteed he would get the worst price,” said the former gold dealer Dominic Hall. “The world and his grandmother shorted the market. Other central banks quietly dribbled gold they were selling on the market.” Stokes added: “The auction process raised hysteria and a negative sentiment in the market. Had the government sold a small amount quietly on the market every day, no one would have noticed. The Swiss sold far more without anyone noticing.

“It gave the professionals a chance to boot down the market and then scoop up the gold cheap at the auctions.”'

...but the question remains: Exactly who's gold was it that GB sold? Since China cannot inventory GBs gold reserves perhaps the only way China can find out if they still own gold stored in GB is to recall it?

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