Revealed: why Gordon Brown sold Britain's gold at a knock-down price

Gordon Brown’s economic strategy illustrates how he sold the majority of Britain’s gold reserves for prices between $256 and $296 an ounce, only to watch it soar so far as $1,615 per ounce today. First, he broke with convention and announced the sale well in advance, giving the market notice that it was shortly to be flooded and forcing down the spot price. Second, the Treasury elected to sell its gold via auction. Again, this broke with the standard model. The price of gold was usually determined at a morning and afternoon "fix" between representatives of big banks whose network of smaller bank clients and private orders allowed them to determine the exact price at which demand met with supply. The auction system again frequently achieved a lower price than the equivalent fix price. The first auction saw an auction price of $10c less per ounce than was achieved at the morning fix. It also acted to depress the price of the afternoon fix which fell by nearly $4. It seemed almost as if the Treasury was trying to achieve the lowest price possible for the public’s gold. The crash which began in 2007 and endures still was the result of an abdication of responsibility across the financial sector. The gold panic of 1999 was expensively paid for by the British public. The one thing politicians ought to have bought with that money was a lesson in the structural restraints which needed to be placed on banks now that the principle that they were ultimately public liabilities had been established.

The new media and the 24-hour news cycle have a great deal to answer for, not least encouraging a political class which would otherwise be happily engaged expensing duck houses into the belief that it should demonstrate perpetual action on our behalf – hence the endless stream of badly drafted legislation from the corridors of Whitehall. The issue of manipulation in the gold market which I wrote about last week is a case in point. The ball of half-truths and downright lies which have surrounded the issue for a long time is beginning to unspool in an issue internet activists kept alive long before it was acknowledged by the mainstream media.