PrintMay 26, 2011
The Gold Plated Blunder of the Century
Today virtually all countries that can do so are buying gold bullion as quickly as they can as a hedge against the potential collapse of the US Dollar as well as a means of protecting their own currencies against inflationary pressure. Even such countries as Mexico amassed nearly 100 tons of Gold in the first quarter of 2011. China purchased over 300 tons of the precious metal during 2010 and has continued the acquisition program during 2011.
In another surprising development, various countries in the Middle East have also been active in the gold market. Iran has been one of the largest buyers. They have done so to protect their reserves against the risk of seizure and exposure to the US Dollar. Iran has, in fact been one of the biggest buyers over the past decade after China, Russia and India. One of the ironies of all this is that Iran holds the same amount of gold as the once biggest colonial power in the history of the world: the United Kingdom.
This development came about as the result of one of the most inexplicable actions ever taken by a country and its financial leadership. This month marks the 12th year anniversary of the United Kingdom voluntarily choosing to divest itself of nearly half of its gold reserves under the leadership of Chancellor of the Exchequer, Gordon Brown (a member of Tony Blair's Labour government).
Despite warnings and the reluctance of the Bank of England Board (the UK Central Bank), Mr. Brown insisted that beginning in 1999 through 2002 the Treasury would sell 395 Tons of the 715 tons held by the Bank of England. Over this period of time gold was selling at 20 year lows. In a series of 17 auctions between 1999 and 2002 the buyers paid the UK between US$256 and $296 per ounce. The largest buyer: China
The net proceeds of the sale were around US$3.5 Billion. Today gold is selling for US$1,520 per ounce or more than 5.5 times more than the average selling price realized by the British Government. Thus the people of the United Kingdom lost nearly US$16 Billion Dollars.
In typical bureaucratic action, information relating to this decision is still being hidden from the public except for very limited, redacted and edited documents. Mr. Brown and Mr. Blair refuse to discuss the matter.
One final note: what were the proceeds of this gold sale invested in? US dollars, euros and the Japanese yen which have been stagnant or have declined in value. With leadership like this it is no wonder the globe constantly finds itself in one financial crisis after another.
