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Original poster

All those who keep saying 'but he sold our gold' I'm interested in why it bothers you so much, ta muchly.

113 replies

Beachcomber · 04/05/2010 08:10

Thanks to anyone who wants to explain a bit to me about this because I don't really get the point you're making.

I understand that GB sold about half of the UK's gold reserves at a time when the price was quite low. It is easy to say now, with hindsight, that it wasn't a good time to sell (although that would only take into account price and not the reason behind the sale). However the money was invested in currency, right? So it isn't like it isn't there anymore, it is just in a different form (euros, dollars and yen).

Also AFAIK the point of selling some gold was to make a comitted move to an economic policy which would inhibit fluctations in inflation. GB said he was committed to stable inflation (appararantly this is what he was referring to with the 'boom and bust' statement).

So to those who seem upset about this move can you tell me why cos I don't get you. (Please try to present arguments and facts and refrain from personal attacks on the PM about being 'a liar' and 'incompetant'.)

Here is a link to something which explains how I see the gold issue.

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Original poster
Beachcomber · 04/05/2010 09:24

Callisto do you know why he was advised not to sell?

He obviously thought he was right and going by how he has managed to maintain stable inflation levels for the UK, it seems that he must be doing quite a lot right, no?

Why is gold more of an asset? In times of instability no one wants to buy it/has the money to buy it. Gold doesn't retain its value, it fluctuates a great deal.

This idea that GB is pig headed and incompetent just doesn't hold any water for me. He is obviously very intelligent. He is being applauded for his handling of the financial crisis and countries which rejected his predictions/proposals at the end of the 90s with regards to the global economy are now agreeing with him.

What would the UK rather have now; stable inflation and currency reserves during a financial crisis or rising inflation and some basically useless gold reserves?

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ooojimaflip · 04/05/2010 09:24

I think if you want to use national assets to speculate and grow your investment you use a sovereign wealth fund rather than your reserves.

Igglybuff · 04/05/2010 09:18

afaik foreign currency and gold reserves are used to try and manage fluctautions in the domestic currency. Gold is a good choice (or was) as it generally holds its value over time, there's always a market for it and it has psycological (sp?) value too (hence people getting upse about gold being sold - they wouldn't say the same about dollar bonds!)

I don't think the reserves are used to hedge inflation.

The reserves aren't all currency - there is still some gold left.

ooojimaflip · 04/05/2010 09:14

Callisto - WHY does gold have an intrinsic value?

Callisto · 04/05/2010 09:13

It annoys the hell out of me because GB was told by several economists and experts that he shouldn't sell our gold but he did so anyway. It sums up his personality for me - an unwillingness to listen to anyone else or to allow the possibility that he is wrong and others are right.

At the most basic, gold will always be more of an asset than currency. Gold has an intrinsic value that currency just doesn't have and in times of instability (which the world is facing with global energy, water and food shortages) gold will retain its value.

Original poster
Beachcomber · 04/05/2010 08:59

Ok, thanks. I understand that it wasn't a good time to sell and announcing the sale seems odd although perhaps inevitable in order to conclude the sale.

Can anyone expand on the questions about inflation hedging/the point of keeping gold reserves/why the Conservatives didn't sell earlier/the fact that the reserves are now currency which is more flexible that gold?

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ooojimaflip · 04/05/2010 08:55

Announcing the sale was foolish. There may have been good reasons to do so to announce a committed move to an economic policy which would inhibit fluctations in inflation.

The fact that gold prices are now much higher is moot - it couldn't have been predicted, and even as a response to the financial crash etc. the price seems irrationally high.

What I want to know is why gold is worth anything anyway. Is it JUST a historical accident of picking which scarce resource we want to see as the basis of wealth? I mean, you can't eat it, it's not particularly industrially useful, it's not the rarest, it's just pretty.

sarah293 · 04/05/2010 08:46

This reply has been deleted

Message withdrawn

Haliborange · 04/05/2010 08:46

It's also the fact that prior to selling the gold he announced he was going to do so, which resulted in the price falling very low. Gold prices are highest when there is a limited supply, so announcing you are going to have 17 auctions and sell off loads of the stuff is a good way to lose money.

There's a good explanation of why it annoys people here.

BeenBeta · 04/05/2010 08:44

I worked for a large gold trader at the time the UK sold its gold. It is not only that the market timining was wrong (the gold was sold for a lower price than it would have cost to mine and refine it).

The worst part, was that the sale was pre-announced. Every single trader in the market knew it was going happen. The price fell immediatley after the annoucement. Many traders also went short and pushed the price even lower and just waited for the UK gold to be delivered. They made a fortune. It was the worst possible way to handle such a massive sale.

The whole event was/is known as the 'Brown Bottom' in the market.

megcleary · 04/05/2010 08:41

It is the short sightedness of his decision now proven with the fact the price is rising. Combined with the fact he will not discuss it, it is pointless to discuss it nothing can be done but we should learn from it. Also it is a question that has interested me for years and he was here why not ask.

CoteDAzur · 04/05/2010 08:33

Whoever wrote that Times article should look up the rather important concepts of "time value of money" and "inflation". He would then see that $3.9bn in 2000 is not the same thing aS $3.9bn ten years later.

Original poster
Beachcomber · 04/05/2010 08:21

I forgot to say that I would be interested in anyone knows what is being done with the currency reserves. For example is it being lent out in order to make interest or is this sort of thing impossible/not allowed?

Just wondering because I read somewhere that gold reserves are increasing seen as a bit pointless because they have a very limited lending capacity compared to currency.

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